Life insurance feels like something our parents worried about, not us. But here’s the thing: if anyone depends on your income (partner, kids, aging parents) or you’ve got debt you don’t want to leave behind, it’s actually one of the most important financial decisions you’ll make. And honestly? It’s way more affordable than you probably think.
Most people wildly overestimate what life insurance costs. Studies show that more than half of people think a policy would cost over $500 per year, when in reality, a healthy 30-year-old can get coverage for under $200 per year. We’re talking less than the cost of your monthly streaming subscriptions combined.
Let me break down everything you need to know to make a smart decision.
The Bottom Line on Price
Insurance companies aren’t just picking numbers out of thin air. They’re calculating risk based on several key factors:
Age is the biggest deal. Insurance companies look at your life expectancy, and obviously, the younger you are, the less risky you are to insure. Buy a policy at 30 instead of 40, and you can potentially save thousands of dollars over the life of your policy.
Gender matters too. Women have longer life expectancies (79.3 years versus 73.5 years for men), so women almost always pay less than men of the same age and health. It’s just statistics.
Smoking is a massive factor. If you smoke, you could pay around $227 per month for a policy that would cost a non-smoker just $62 per month. That’s nearly four times more. If you’re thinking about quitting, this is yet another reason to do it.
Your health obviously plays a role. Pre-existing conditions, your weight, blood pressure, cholesterol levels, and your family medical history all factor into your rate. The healthier you are, the less you pay.
How much coverage do you want and for how long? Obviously, a $1 million policy costs more than $250,000. And a 30-year term costs more than a 10-year term because the insurance company is taking on more risk over a longer period.
Our Favorite Life Insurance Companies
| Company | Best For | Highlights | Next Steps |
|---|---|---|---|
| Banner Life | Best for Term Life Policies |
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| Ethos | Best for No Medical Exam Coverage |
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| Corebridge | Best for Whole Life Insurance Policies |
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| Ladder Life | Best for Young Families |
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| Guardian Life | Best for Individuals with Complex Health Situations |
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| Nationwide | Best for Bundling with Home and Auto |
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| MassMutual | Best Company for Indexed Universal Life (IUL) Policies |
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The Main Types of Life Insurance (And What They’ll Cost You)
There are basically two categories of life insurance: term and permanent. Let’s break down what each one actually is and what you’ll pay.
Term Life Insurance
Term life insurance is the most common and straightforward option, and it’s often the best fit for most people.
The concept is simple: you select a set period (commonly 10, 20, or 30 years). If you pass away during that term, the policy will pay out to your beneficiaries. However, if you survive the term, the policy does not payout, and your premiums are forfeited.
Because it only covers a specific time frame (like the years you’re raising a family or paying a mortgage), term life is significantly more affordable than other types of coverage. A key benefit is that your premium remains fixed for the entire term, making it easy to budget.
What it costs: For a healthy 20 to 40-year-old, a 10-year term policy with $250,000 in coverage typically costs between $24 and $31 per month. Need more coverage? A $500,000 policy with a 10-year term costs an average of $37 per month for men and $31 per month for women.
Why choose it: It’s affordable, simple, and gives you massive coverage during the years when people actually depend on your income. Perfect if you have a mortgage, young kids, or other financial obligations that will eventually go away.
Whole Life Insurance
This is a permanent policy that lasts your entire life (as long as you keep paying the premiums). Unlike term life, whole life includes a “cash value” component that grows over time, kind of like a savings account inside your policy.
While whole life insurance is significantly pricier than term life, it provides valuable financial guarantees: the premium and the death benefit are fixed for the policy’s entire duration. An added benefit is that when purchased from a mutual company, the policy’s cash value may earn annual dividends.
Cost Context: Whole life is a major financial commitment. For someone in their 30s, the average monthly premium is around $200, which translates to an average annual premium of approximately $3,693 for a female and $4,013 for a male (though costs vary based on health, coverage amount, and policy type).
Why choose it: Whole life makes sense if you’ve maxed out your retirement accounts, want to build cash value you can borrow against, or need permanent coverage for estate planning. It’s also good if you want the certainty of fixed premiums that never go up.
Universal Life Insurance
Think of this as the flexible cousin of whole life. It’s still permanent insurance with a cash value component, but you can adjust your premiums and death benefit over time as your life changes.
Universal life (UL) insurance is often viewed as a more flexible variation of whole life insurance. Like whole life, it provides permanent coverage and allows the policy to build cash value over time. Its key distinction is its flexibility: as long as the policyholder pays the minimum required premium, they maintain coverage for life.
What it costs: Universal life insurance costs about $294 per month on average, which is less than whole life but still significantly more than term.
The catch: Universal life offers more control, but it requires oversight and doesn’t have a guaranteed death benefit. If you underfund the policy, it can lapse, leaving you with nothing. You need to stay on top of it.
Why choose it: Universal life works well if you’re financially savvy, want flexibility, and are comfortable managing your policy over time. It’s not a “set it and forget it” option like whole life.
Can You Cash Out Life Insurance?
One of the most confusing things about permanent life insurance (whole life and universal life) is this cash value component. Here’s what you need to know.
The cash value in permanent policies (whole and universal life) offers a unique benefit: tax-deferred growth. The funds grow without being subjected to taxes on the earnings as long as the money is left in the policy. This powerful, tax-advantaged compounding over decades allows the cash value to evolve into a substantial, accessible asset that you can draw upon during your lifetime.
Ways to Access Your Cash Value
You’ve got a few options if you want to use that money:
Borrow against it. You can take out a loan against the cash value of your life insurance in many cases. You’ll be charged interest, usually at a more favorable rate than you would get on the open market. You can take out a loan for up to 90% to 95% of the cash value. If you don’t pay it back before you die, the loan gets deducted from your death benefit.
Withdrawals: You can withdraw money directly from your cash value. Be aware that this action permanently reduces your policy’s death benefit. Additionally, if the withdrawal amount exceeds the total premiums you’ve paid (your cost basis), you will likely owe income tax on the gains.
Premium Payments: Cash value can be used to cover some or all of your policy premiums, making it easier to maintain coverage without out-of-pocket payments. This is an attractive option for retirees who wish to keep their insurance in force.
Cashing Out Completely (Surrendering Your Policy)
If you decide you don’t want or need the policy anymore, you can surrender it and get the cash surrender value. But here’s what actually happens:
The Cash Surrender Value is the total cash you have accumulated in your policy, minus any applicable surrender charges or fees. Since these charges gradually decrease over time, the longer you own the policy, the closer your Cash Surrender Value will be to the full Cash Value.
Most cash value insurance policies are subject to a surrender period for the first 10 years that the policy is active. Insurers often reduce surrender charges by a percentage each year over the first decade. So if you cash out early, you could lose a big chunk to fees.
Tax implications: You’ll only have to pay taxes if the surrender value is greater than the amount of premiums you paid for your policy. The difference between what you get back and what you paid in is treated as taxable income.
Honestly, surrendering your policy is usually a last resort. There are better ways to access that money if you need it.
How to Actually Save Money on Life Insurance
Here are some real strategies to get the best rate:
The single most effective way to secure the lowest rate is to buy young. Life insurance companies offer their most favorable premiums to applicants who are both young and healthy. If you have a known need for coverage, purchasing it as early as possible is highly recommended, as the difference in cost between buying, for example, at age 30 versus age 40, can potentially save you thousands of dollars over the policy’s lifetime.
Quit smoking. Smokers can pay six to ten times more for life insurance. If you quit, many insurers will reconsider your rate after you’ve been smoke-free for a year or two.
Get healthy. Maintain a healthy lifestyle. It genuinely affects your rate.
Consider buying more coverage than you think you need. The monthly premium is often negligible, and it may be difficult to get more coverage later. Plan for lifestyle creep as you age.
Shop around. Rates vary significantly between insurers for the exact same coverage. Get quotes from multiple companies and compare.
Skip the permanent policy if you don’t need it. For most people, term life gives you everything you need at a fraction of the cost. Don’t let an agent talk you into a whole life if term makes more sense for your situation.
How Much Coverage Do You Actually Need?
This is super individual, but here’s a general framework. Your coverage amount should be enough to pay your unpaid debts, burial costs, and your dependents’ expenses. This equals about 10 to 12 times your annual salary.
Think about what your family would need if you weren’t around:
- Your mortgage or rent payments until your kids grow up, or your spouse could downsize.
- Your kids’ college expenses, even if you’re planning to help with that.
- Your outstanding debts (credit cards, car loans, student loans).
- Final expenses like funeral costs.
A good rule of thumb: if people depend on your paycheck, you need life insurance. Period.
Making the Decision
Here’s the real talk: most people need term life insurance. It’s affordable, straightforward, and gives you the protection you need during the years when people actually depend on your income. Get a 20 or 30-year term policy with enough coverage to take care of your family, and you’re probably good.
Permanent life insurance (whole or universal) makes sense in specific situations. If you’ve already maxed out your retirement accounts, want to build cash value, need coverage for estate planning purposes, or want the certainty of lifelong coverage, then sure, consider it. But for most millennials, term life is the way to go.
The worst decision you can make is putting this off. Every year you wait, it gets more expensive. And if something happens to your health, you might not qualify for the best rates anymore, or worse, you might not qualify at all.
Get quotes from a few companies, compare your options, and pull the trigger. Your future self (and your family) will thank you.
The Bottom Line
Life insurance doesn’t have to be complicated or scary. At its core, it’s just a safety net for the people who depend on you. For a 30-year-old, coverage costs just $1 or less per day. That’s an incredibly small price to pay for massive peace of mind.
Don’t overthink it. Don’t wait for the “perfect time.” If you need it, get it now while you’re young and healthy, and the rates are lowest. Compare term life policies from a few highly-rated insurers, pick the coverage amount that makes sense for your situation, and lock in your rate.
And if you already have coverage through work? Great! But know that it’s probably not enough, and it disappears when you leave that job. Most experts recommend getting your own individual policy to supplement employer coverage.
You’ve got this. Now go get yourself some life insurance and check this important adulting task off your list.
