Table of contents
Buying life insurance can be confusing and expensive. You want to protect your family in case something happens, but you don’t know how much life insurance costs and which options are best for you.
In fact, many consumers cited premiums that were 3-4 times the actual cost of life insurance.
This post will show you the true costs of insurance, and the factors that affect it.
Read on to find out all you need to know to make an informed decision about purchasing life insurance.
- Key takeaways:
- Of the two most common types of life insurance in Canada, term and permanent life insurance, the former is the more affordable option.
- Factors that affect your life insurance cost include your age, gender, amount of coverage, policy length, health, and lifestyle.
- Given the many factors that influence the cost of life insurance, the best way to determine your premium is by getting a personalized quote.
Types Of Life Insurance
Before we get into how much life insurance costs, it’s important for you to understand the different types of life insurance. That’s because the average cost of life insurance depends on the type you choose.
Term life insurance
Term life insurance—or simply term insurance—is the most basic type of life insurance. In exchange for the premiums, the life insurance company pays out a death benefit to your family if you die during the term.
It’s the ideal type of insurance to cover your debts like a car loan and allow your family to continue to make mortgage payments. Your family can also use the death benefit to replace your income and cover children’s education expenses.
What happens to term insurance if you don't die?
When the term expires, you can choose to renew it for much higher monthly premiums. At that point, because of the increased life insurance cost, most people either cancel it or buy a brand new policy.
You can think of term life insurance as pure insurance. It doesn’t have any cash value that builds up over time. If you don’t die before the term expires, you don’t get any money back.
You might be wondering—how long can your term life insurance be? The most common term length is 10 or 20 years. Most insurance companies offer this type of coverage. Besides those, many let you choose a policy length of 15, 25, or 30 years. One life insurance company in Canada even lets you choose any policy length between 5 to 50 years!
Permanent life insurance
Unlike term life insurance, permanent life insurance lasts a lifetime. Most policies also have perks like a cash value that grows over time tax-deferred. You can treat the cash value as an investment and use it to fund your retirement. At the same time, the death benefit also grows, so your loved ones could end up getting much more money than the original face value.
Although many people use permanent life insurance to build cash value, you can also cover funeral expenses and for estate planning.
Because permanent life insurance never expires and has cash value, it costs more than term life insurance.
Which type of life insurance should you get?
The right life insurance policy for you depends on your needs and financial situation. In general, if you want affordable coverage to cover your outstanding debts and replace your annual income, a term life insurance policy is right for you. Term insurance is more cost-effective over the short term, so it’s the perfect fit when you are on a tight budget.
However, you might want to consider permanent insurance if you want coverage that lasts forever or want to build up cash value inside a tax-sheltered environment. In that case, premiums for a permanent insurance policy will be more cost-effective.
Factors Affecting The Cost Of Life Insurance
As you can imagine, the cost of life insurance isn’t the same for everyone. What affects your life insurance costs, then? Below are some of the most important factors.
Age
The younger you buy life insurance, the lower your rates. That’s because your mortality rate, or your chance of dying, increases as you get older.
Gender
Women have a longer life expectancy than men. As a result, for the same amount of life insurance coverage, women pay less than men.
Coverage
The coverage amount, also known as the death benefit or face value, is a major factor in determining life insurance costs.
How do you know how much coverage you need? Obviously, the more you get, the higher the life insurance premiums. You’ll want to choose an appropriate face value to provide a financial safety net for your family. Too much, and you pay higher premiums. Too little, and you risk jeopardizing your family’s financial future.
Policy length
As mentioned above, you can get term life insurance policies of different lengths. The longer the term length, the higher the cost. For example, a term-20 policy will cost more than a term-10 policy. When choosing a policy length, you’ll want to select the right one for your financial situation.
For example, if you want to cover your mortgage, with 10 years left before it’s paid off, you can get a term-10 policy. Conversely, if you’re 35 and want the death benefit to replace your income until you retire at 65, you should get a term-30 policy.
Health
If you are in good health, you can expect to pay the average cost. You might even qualify for preferred rates and pay the cheapest rates available. That’s how life insurance companies reward you for living a healthy lifestyle.
However, if you have health issues, you can expect to pay higher premiums to account for the increased risk. The insurer takes into account your current health status as well as your medical history. So even if you’re in good health now, you might have to pay higher life insurance costs if you have a history of illness.
Sometimes, you have to undergo a medical exam to determine your current health. During the medical exam, the insurance company will measure things like your:
- Blood pressure
- Cholesterol level
- Blood sugar level
You might be able to get better results on your medical exam if you lower your stress level, eat a healthier diet, and exercise.
While some of the factors are within your control, others aren’t. For instance, besides your own health, your family history of an illness like diabetes or cancer may also affect your rates.
Lifestyle
Your health makes up half the equation when determining your cost of life insurance. Equally important to the insurance company is your lifestyle. Higher risk lifestyles lead to higher premiums.
Here are a few things insurance companies will ask:
- Smoking status
- History of driving offenses
- Participation in dangerous activities
- History of criminal offenses
And more. In particular, your smoking status has a huge effect on your life insurance premium. Smokers can expect to pay 2-3 times more for insurance coverage than their non-smoking counterparts.
Remember that different insurance companies treat your health and lifestyle differently. So while one insurance company might offer you coverage at a high rate, not all of them will. It pays to use a knowledgeable broker who not only compares life insurance quotes but also your likelihood of qualifying for the insurance policy at the quoted rates.
How Much Does Life Insurance Cost Per Month On Average?
Now that you know the factors that affect your rates, let’s look at some examples to see how much these factors matter.
Term life insurance rates by age
This table shows the monthly life insurance cost for a male non-smoker buying $500,000 of term-20 coverage.
| Age | Monthly premiums |
|---|---|
| 20 | $31.05 |
| 25 | $31.05 |
| 30 | $31.50 |
| 35 | $36.45 |
| 40 | $51.30 |
| 45 | $85.50 |
| 50 | $141.30 |
| 55 | $234.45 |
| 60 | $423.90 |
| 65 | $696.15 |
As you can see, while your rates don’t increase too much from your 20’s to 30’s, it starts to accelerate the older you get.
Term life insurance rates by gender
The table below shows how much life insurance costs per month for men compared to women at different ages for $500,000 of face value.
| Age | Monthly premiums for male | Monthly premiums for female |
|---|---|---|
| 30 | $31.50 | $24.30 |
| 40 | $51.30 | $39.60 |
| 50 | $141.30 | $94.05 |
| 60 | $423.90 | $305.10 |
On average, men pay between 20-35% more for life insurance than women to account for their shorter life expectancy.
Term life insurance rates by death benefit
This table shows the monthly costs of a 40-year-old male non-smoker buying a term-20 policy.
| Death benefit | Monthly premiums |
|---|---|
| $100,000 | $17.82 |
| $250,000 | $31.50 |
| $500,000 | $51.30 |
| $750,000 | $76.95 |
| $1,000,000 | $97.20 |
| $1,500,000 | $145.80 |
| $2,000,000 | $194.40 |
Insurers give you a discount for buying more coverage. That’s why $500,000 costs less than twice as much as $250,000, and $1,000,000 costs less than twice as much as $500,000.
Term life insurance rates by policy length
The table below shows the monthly life insurance premiums for different term lengths for a 40-year-old male non-smoker buying $500,000 of coverage.
| Policy length | Monthly premiums |
|---|---|
| Term-5 | $28.80 |
| Term-10 | $34.20 |
| Term-15 | $46.80 |
| Term-20 | $51.30 |
| Term-25 | $72.90 |
| Term-30 | $100.35 |
| Term-35 | $124.20 |
| Term-40 | $166.95 |
Because life insurance premiums are guaranteed for the whole term, insurance companies charge you more for longer terms.
Frequently Asked Questions
Is it worth paying for life insurance?
If you have a family that depends on you for their financial wellbeing, the question is not whether you can afford life insurance. It’s whether you can afford not to buy life insurance. As you can tell from the tables above, life insurance doesn’t have to cost an arm and a leg. You can provide a financial safety net for your family for only a few dollars a day.
At what age should you get life insurance?
The short answer is: it depends. Some people may want to get it as soon as they’re working to lock in their good health and young age. Others may want to wait until they have dependents before dipping their toes in. Because of the makeup of the modern family, that could mean getting it in your early 20’s all the way to your 50’s.
The most important thing to remember is not to wait too long once you have dependents. In fact, it should be on top of your to-do list once you find your significant other and have children.
Should you buy insurance if you're covered through work?
While having some coverage is better than not having any at all, your employer most likely doesn’t offer you enough. To ensure that your family is protected in case of the unexepected, you’ll want to top-up your coverage by buying your own life insurance policy.
Another thing to consider is if you change jobs or your employer cuts your benefits. Will you be left stranded without coverage at the worst possible time?
Do you need to buy another life insurance policy if you already have one?
When was the last time you reviewed your insurance policy? Does it still provide the right coverage for you? These are some of the questions you want to ask when you’re thinking about buying more coverage.
As you can imagine, life is constantly changing. The life insurance policy you bought many years ago might not be the right fit for you now. So you might want to think about replacing it or buying more coverage.
There aren’t any rules against having multiple life insurance policies, so don’t feel like you can only own one at a time. In fact, many people own lots of policies at the same time!
How much life insurance should you get?
There’s no right answer to this question either. Two people in the same financial and personal situation might end up buying different amounts of coverage. Do you want to cover your debts? How many years do you want the payout to replace your income? These are all factors that affect how much you should buy.
To give you a rough idea of the amount, use our life insurance calculator and plug in some numbers. It should only take you a minute to get an estimate of how much you should get.
How can you lower your costs?
One of the best ways to reduce your premium is to buy life insurance while you’re young and healthy. The longer you wait, the more it costs. To make matters worse, if you develop any medical conditions, that will increase your premiums even more.
Another way to lower your rates is to buy the right amount. You don’t want to overpay by getting too large of a life insurance policy. Not only does this mean calculating the right amount of coverage at the moment, but it also means adjusting it as life changes.
Finally, if you have good health, you want to avoid no medical life insurance. As the name implies, you don’t have to undergo a medical exam to buy these policies. While that might sound like a good idea, no medical life insurance cost more because the insurance company knows less about you. Insurance companies hate unknowns, so they will charge you a higher premium to account for it.
Check out our post on saving on life insurance for even more ways to reduce your costs.
How can you get a life insurance quote?
To quickly compare quotes, you can use our quotation tool. It will ask you to fill out a simple online form that only needs three things:
- Date of birth,
- Gender, and
- Smoking status
You can also choose the amount of coverage and type of life insurance. After you hit Compare Now, it will show you a customized list of insurance companies sorted from lowest cost to highest. Now you know how much money you can expect to pay for a life insurance policy!
Get Your Life Insurance Coverage Today
It’s no surprise that the cost of life insurance depends on many factors, some of which are out of your control. But it is important to remember that there is a benefit in comparing life insurance quotes with different insurers if you want an affordable policy that fits your needs.
To help make this process easier for yourself, use our life insurance calculator to determine what kind of coverage will fit your budget and still cover all the essentials.
The bottom line? Life insurance in Canada can cost less than a cup of coffee a day each month—so get started today!
Get Your Life Insurance Quote Now
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
2 Comments
do you insure seniors at age 72 ?
Hi Gerry,
Yes, seniors can get life insurance at 72. I’ll shoot you an email with more information.
Regards,
Brian