How Are Permanent Life Insurance Rates Calculated?
Key takeaways
Permanent life insurance rates depend on things like your age, health, how the policy is set up and the amount of coverage.
Gender is also a factor. Women pay slightly less than men with the same age and health.
Online calculators can give you a general idea of the cost, but to get a more accurate number, you’ll want to speak to a financial advisor.
1 Sean McGinn is an assistant director of Product Positioning in the Risk Products department at Northwestern Mutual.
When you research life insurance, you’ll see articles about the various types along with the pros and cons of term vs. permanent life insurance. While it’s easy to find information that explains the additional benefits—and cost—of permanent insurance, it’s harder to find details online about exactly how much permanent insurance costs.
Part of the reason for this is because permanent policies tend to be very flexible. That’s great because it means your advisor can tailor a policy for your situation. But it also adds some complexity to giving you a simple price online. Another reason it’s hard to give a precise online quote is that rates depend on things like your age, health, how the policy is set up and the amount of coverage.
While it’s difficult to give you an exact price before you meet with a financial advisor, here you’ll get at least a general idea.
Understanding permanent life insurance
First, let’s review the value of life insurance, which plays a critical role in financial planning.
The death benefit that you get with term or permanent insurance helps to protect your family financially if the insured person passes away prematurely. While a term life insurance death benefit eventually expires, permanent life insurance offers a lifelong death benefit unless you cancel your policy or stop paying your premiums. Permanent life insurance can also help your family even if you live a full life. Permanent policies accumulate cash value over time, which you can use throughout your life1. Permanent life insurance is a more robust and flexible asset in a long-term financial plan. Because of its lifelong death benefit and cash value, it’s more expensive than term.
Permanent life insurance comes in several different forms, including whole life, variable universal life and universal life.
What affects the cost of whole life insurance?
Whole life insurance tends to be the most straightforward type of permanent life insurance. The cost of any type of policy can vary from company to company, and policies can be customized to you and your goals. This is great because it allows a policy to be tailored to your needs. It also means that the amount varies from person to person.
A life insurance quote usually depends on things like:
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Your age – You’ll pay less per year if you start your whole life insurance policy when you’re younger.
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Your health – Your overall health and whether you smoke will impact the amount you pay.
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Your gender – Because women tend to live longer, they can expect to pay slightly less.
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Your death benefit – Of course, you’ll pay more for a larger payout.
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Your policy design – Whole life insurance policies can be structured in many different ways and include a variety of optional additional benefits or “life insurance riders.”
You don’t necessarily have to pick just one type of coverage—you can use multiple policies to get what you need. And what’s right for you may evolve in the future as your family and career grows. That’s why it’s best to build flexible plans.
2 When you apply for most life insurance policies, you’re asked for information about your health and activities. The insurance company will factor in your information and give you an idea of the cost for a certain amount of coverage. The company may also ask about hobbies that are considered high risk, such as piloting small aircraft. Based on your answer, a company may have to charge more or, in rare cases, may not offer you a policy.
How much is life insurance per month?
The cost of life insurance will depend on you, your health and your coverage—so it’s really hard to share an average cost. But we’ve got some resources that can help give you an idea.
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Our life insurance calculator asks a few questions about you and your life. Then it estimates how much coverage makes sense and the approximate cost.
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You can talk with your Northwestern Mutual financial advisor, or find one in your area who has the right expertise for your goals. You’ll get a fine-tuned recommendation on how much insurance coverage you need and suggestions that work with your overall financial plan.
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Below, we show you a range to help give you a general idea.
Consider a 35-year-old man who doesn’t smoke and is in good health. He talked with a financial advisor and decided that a policy with a $500,000 death benefit matches his situation.
Depending on the insurance company,2 the permanent life insurance rates for this $500,000 policy could fall between $542 and $708 per month—or approximately $6,500 to $8,500 per year—payable until age 100.
Let’s say the policy will be for a woman (also 35, in good health and who doesn’t smoke) for the same $500,000 death benefit. She might expect to see quotes of around $700 per month.
Someone who is a different age, smokes or has a different health history will see quotes in a different range. And even small changes to the example can change this cost.
If the woman in our example wants to pay for her policy only until she’s 65 instead of 100, the cost will be higher. She might want to maximize (or minimize) the growth of cash value—money that she could access while still alive. This can also affect the cost.
And it’s worth noting that a term policy with the same death benefit (but without the additional benefits of permanent insurance) will be only a fraction of the cost above.
Work with a financial advisor
It’s a good idea to work with a financial advisor to find the right life insurance policy for you. Your advisor will get to know you and recommend a policy that’s a good match with your situation. Your advisor can also show you how your life insurance policy can work together with other financial tools, like investments, to help you achieve your goals.
