Average Cost of $500,000 Life Insurance in October 2023

The average monthly premium for a $500,000 term life insurance policy is $29. This coverage offers more than just funeral expense relief; it can also cover mortgage payments, educational costs and daily living expenses for years. While many insurers offer this policy, costs and benefits can vary. MoneyGeek broke down the different kinds of life insurance available in the market and the factors that affect their cost.

Life insurance companies determine rates based on the insured's age, gender, health profile, lifestyle and other factors. Policy details, including term length and coverage amount, also affect premiums. For instance, the average cost of a $500,000 life insurance policy with a 10-year term for a 40-year-old with excellent health is $29 per month. The average monthly premium for a 20-year term for the same individual is approximately $44. Understanding factors insurance companies consider when evaluating life insurance rates can help you find the most suitable policy for your financial circumstances and coverage needs.

The term length of your life insurance is the number of years the insurance company will cover you. If you die within that period, the insurer will pay a death benefit to your beneficiary. Companies typically offer term lengths ranging from 10 to 30 years.

Your policy's term length will affect your premiums. Shorter terms, like a 10-year life insurance plan, will have lower rates. Choosing a longer term, like a 20-year term, will result in higher premiums. The insurer agrees to a longer coverage duration. The likelihood of a claim also increases.

We broke down the average cost of a $500,000 life insurance policy for various term lengths in the table below.

Age is the most critical factor affecting life insurance's cost since insurance companies consider it the most significant risk determinant. People typically buy life insurance in their 40s, but purchasing a policy at a younger age to lock in a lower premium is generally better.

On average, a 10-year term life insurance policy costs $20 per month for a 30-year-old person, while a 50-year-old buying the same plan would pay $65 per month.

In addition, a longer-term length also makes life insurance more expensive. A 30-year-old person buying a 10-year term life insurance policy would pay $20 per month on average, but they'd have to pay $28 per month for a 20-year policy.

Use the table to compare rates and see how premiums differ across age groups from 30 to 70.

Insurance companies consider health an essential underwriting factor when pricing their policies. Generally, a person with poor health is riskier to insure because they have a higher chance of dying early.

Because smoking may lead to health problems and early death, it's much riskier for insurers to provide life insurance for smokers. A person's lifestyle and health profile also affect their life insurance rates.

On average, a 20-year term life insurance policy costs $44 monthly for a healthy non-smoker adult. The average cost of the same policy for a smoker is $102, while a person with poor health may have to pay $53 monthly.

Below are tables highlighting the average costs of a $500,000 term life insurance plan for smokers and people with poor health.

Permanent life insurance policies don’t expire, but they can cost up to 20 times more than term life insurance policies on average. Whole life, universal life and guaranteed issue are the most common types of permanent life insurance.

Because such policies are guaranteed to pay beneficiaries provided premiums are up to date, they are more expensive than term life insurance.

People buy permanent life insurance to provide lifetime financial protection for their loved ones and supplement their retirement assets. Whole life insurance offers death benefit coverage and savings for the policyholder’s entire life.

Similarly, universal life insurance grants death benefit coverage but is riskier. With this type of insurance, you can customize your coverage amount, monthly premiums and how your savings will be invested based on your preference or financial situation.

Meanwhile, a guaranteed issue policy is a type of permanent life insurance that doesn’t require a medical exam designed for people with severe health conditions.

Instant life insurance is an affordable type of life insurance that doesn’t require medical examinations. Applying for a policy is convenient, as you can complete the process online and receive an immediate response from the insurer, which uses an accelerated underwriting process.

It’s also relatively cheap compared to similar no-exam policies — an average $500,000 instant life insurance policy costs about the same as a traditional one.

To apply, visit an insurance company’s website and fill out personal, contact, health and lifestyle information. The insurer will then collect your health and lifestyle data, including your prescription, driving and medical records. An algorithm will calculate your risk of dying early, and within minutes, the company can either approve, decline or refer your application to an underwriter.

Unlike a guaranteed or a simplified-issue policy (both of which do not require medical exams), an instant life insurance policy doesn’t require a two-year waiting period for the payout of death benefits to beneficiaries. It’s also often a more affordable option.

If you’re looking to get life insurance with a $500,000 coverage limit, instant life insurance is one of the most feasible options. Remember that instant life insurance is only available to certain age groups and people who fit into specific health parameters.

You can obtain a $500,000 life insurance policy from various insurance providers online and through traditional channels. You can also consult financial advisors or use online comparison tools to find the best rates and coverage options.

Transamerica offers the cheapest 10-year $500,000 term policies. Its average monthly premiums are $15 for female adults and $17 for male adults. Allstate provides the second most affordable policies, averaging $17 for females and $18 for males.

The table below shows a comparison of average monthly premiums from different companies. These rates are for a 10-year term life insurance policy with $500,000 coverage.

As a rule of thumb, your life insurance coverage amount should be 10 to 12 times your annual salary. This amount of coverage gives your dependents financial protection in case of your untimely death. Of course, your ideal amount will vary based on your financial and family situation.

If you’re buying a $500,000 life insurance policy, consider any unpaid debt, burial costs and your family’s everyday expenses. It also makes sense to consider future costs, such as your children’s college tuition.

While $500,000 is the most popular coverage amount, you can always buy increased or decreased coverage depending on your needs and circumstances.

We answered some frequently asked questions about $500,000 life insurance to help you decide if these policies are right for you.