Why life insurance is expensive? [or is it]

“Life insurance is expensive” or “How much does life insurance cost?” These are some of the most common things that people say when they hear life insurance. And we get it. Life insurance is expensive, or is it? We wanted to take the time and really go in-depth and put together this guide to finally address the most common reason why people put off getting coverage: PRICE.

why life insurance is expensive

Here’s what we’ll cover:

Understand Life Insurance

Psychological effect life insurance has on people

Sample life insurance rates

What goes into the cost of life insurance

Things you can do to reduce the life insurance rate

You can calculate your life insurance rate with our instant quote tool on this page. Also, you can reach out to us via e-mail, leave a comment or simply call us at 855-795- LIFE (5433).

Understand Life Insurance

Before we dive into the topic of cost, it is important to understand what is life insurance and what types of policies exist.

Life insurance is a promise of a life insurance company to pay out a death benefit to your beneficiaries upon your death. It is a piece of mind that your family will be financially taken care of as they try to come to terms with their new reality.

There are 2 major classifications of life insurance. Each one has its purpose and it can be used to address different needs.

Term insurance – this is the most straightforward type of life insurance. The policy will provide you with coverage during a specific term. The term can be anywhere from annual term policy all the way up to 30 or even 35 years of coverage. Term policies allow you to have the highest amount of coverage for the cheapest premium.

The biggest downfall of this type of policy is that they do not build up cash value and once the term is up, you might be left without affordable coverage.

Permanent coverage –  permanent coverage provides a lifetime of insurance.  In other words, you could not outlive your policy. For example, you could be 75 years old and still pay the premium for 27-year-old Permanent insurance also build cash value that you could use however you deem fit. There are two major types of permanent life insurance- whole life insurance and universal life insurance.  

It is important to mention that permanent insurance costs more than term insurance. However, many people consider that the cash accumulation feature can offset the cost and makes it a wiser choice for the long run.

infographic on Term Vs. Permanent Insurance

Our advice:

Prior to selecting between term and permanent coverage, you need to have a clear understanding of why you need life insurance and what you want to accomplish with it. Based on that, we can help you select a product that better addresses your needs. You can also review the 5 Dos and Don’ts when choosing coverage. 

Psychological effect life insurance has on people

Let’s be honest, no one WANTS to buy life insurance. In fact, it is probably the easiest purchase that people put off. It is natural. Usually, when we spend our money on goods or services, we get something out of it… a new haircut, gym membership, new car and so on.

However, the case is different with life insurance. In most of the instances, we will never experience any benefit of our life insurance, excluding cash value types of policy and the ones with living benefits. Our families will be the ones benefiting from the policy. And to make the matters worse, we have to DIE for someone to use it (again excluding the 2 groups from above).

Therefore, we make the rationalization that life insurance is expensive and we either don’t need it or can’t afford it. However, is this true? Is life insurance really expensive or we just don’t want to spend money on it?

Sample life insurance rates

Did you know that based on a poll conducted by the Life Insurance research organization, LIMRA , more than 80 percent of Americans tend to overestimate the cost of life insurance? In fact, 86 percent of consumers who know they need insurance haven’t purchased a policy because they think it’s too expensive.

“Many have put off buying life insurance based on the belief that it costs too much, but consumers tend to overestimate the price. For instance, when asked how much a $250,000 term life policy would be for a healthy 30-year-old, the median estimate was $500 — more than three times the actual cost.2 Millennials, in particular, offer high estimates of the cost of life insurance”

We felt it is important to demonstrate how much life insurance really cost. Therefore, we created this table below.

The numbers show the life insurance rates for females and males of different ages, such as 25, 35, 45 and 55-years-old. In the example, we’ve included non-smoking rates for individuals who are on average or a little above average health classification. Purposely, we did not illustrate quotes for super preferred ratings.  We also wanted to show how the change in the duration of coverage affects the premiums. This is why we’ve included the rates for 20 year and 10-year term policies for $250,000 in coverage.

Let’s try something….

      ….before going over the table, could you guess how much 20-year term  $250,000 in coverage will cost for a 35 years-old male?

[table id=1 /]

… Were you right or did you over or underestimate the cost?

What goes into the cost of life insurance

There is no way to address why life insurance is expensive, without covering how exactly is your life insurance rate calculated. It is important to understand that life insurance rates are unique to every situation. There are over 60 factors determining your life insurance rate. Every company puts different weights on different factors. This is why your premium may vary from one carrier to another.

The biggest thing life insurance companies are looking at when calculating rates is the applicant’s life expectancy. In other words, companies are trying to predict how long will the insured live. Naturally, longer the life expectancy, lower the premium and vice versa.

Here are just some of the factors that affect life expectancy and from there the cost of life insurance:

Age – age is a big factor when it comes to life insurance. Younger you are, cheaper your life insurance will be.

Gender – men, you will pay more for life insurance than women. This is due to the shorter life expectancy for males than females.

Health – this is a HUGE factor when it comes to life insurance. Companies are looking at your medical record, prescription history, even your family health history.

Lifestyle – not many people are aware that lifestyle choices could also affect your life insurance rates.

Based on the company and the different “mixture” of rating factors, one individual’s life insurance may be more expensive than someone else’s.

Things you can do to reduce the life insurance rate

There are several things that you can do if you would like to reduce the cost of life insurance.

Improve your health -yes, we understand that this could not happen overnight. For some, improving their health may mean quitting any tobacco products, for others may be losing a few pounds. Any little change can have a huge impact on your rates.  


Don’t forget about your existing life insurance. This also applies to in-force policies. We don’t want you to think that just because you already have the policy in force, you could not qualify for a better rate down the line. Things change, you may have quit smoking or your driving record has improved. We strongly urge you to reevaluate existing policies and not to think it is too late to make a change.


Things you can do that will have an immediate impact on your life insurance rate

  • Lower the term of the policy – based on your needs, this may be the first thing to consider.

For example, if your primary objective is to have coverage until the kids are independent, a 15 or 20-year term may be a better option for you, than a 30-year term.

  • Lower the coverage amount – again we strongly advise you to consider your needs prior to doing so. However, for some going with lower coverage than what is needed may be the only option available based on their budget. Sometimes having less coverage than what you need is a better option than having no coverage at all. 
  • Laddering coverage – laddering life insurance coverage means to consider your needs and purchase a combination of several policies with different terms vs. one with a higher coverage amount. We absolutely LOVE this strategy, as it not only offers customization based on your needs but also saves you money. Contact us to get more information. 
  • Work with an independent insurance agent – the biggest advantage when working with an independent insurance agent is that he or she has access to multiple carriers. As we mentioned above, every company will look at you differently based on your health and lifestyle. A good agent will ask you the right questions and try to match you with a company that will offer the most favorable rating for your particular situation.


People overestimate the cost of life insurance. There are many factors determining the price of life insurance. By changing one or two, it could have a major impact on your life insurance rate.

Thank you!