What Is The Average Cost of Whole Life Insurance?
Some reports put the average cost of whole life insurance around $52 per month. However, things like policy value and the insured person's age can cause a considerable price variation.
A young, healthy person looking for a $25,000 policy may be able to find whole life insurance for as low as $20 per month, but an older adult looking for a high-value policy may have a monthly cost of $1,000 or more.
The cost of whole life insurance is usually based on the applicant's age and health when the policy is purchased. Premiums are designed not to increase over time, so a policy purchased when a person is younger will always have a lower premium.
How Much Is a $500k Whole Life Policy?
There is a significant range in average costs based on the applicant and policy details, even for a specific policy amount. The average price of a $500,000 policy is based largely on the applicant's profile. The monthly cost may be around:
- $300 for a healthy 30-year-old
- $700 for a healthy 50-year old
- $1,500 or more for someone over the age of 60 or with significant risk factors
A variety of considerations discussed below can affect the price of a whole life policy.
Factors Affecting the Cost of Whole Life Insurance
The cost of whole life insurance depends on several factors, including:
- Age
- Sex
- Health
- Policy value
- Insurance company
- Policy terms and riders
Policies for older adults and policies with higher values tend to cost significantly more. A history of health problems or other risk factors, such as being a smoker, will also increase average whole life insurance costs.
The insurance company and desired policy terms can also impact the price of a policy. For example, a rider to cover accidental death for someone who works in a hazardous profession may increase the average cost of whole life insurance.
Is a Whole Life Policy a Good Investment?
High-value whole life insurance policies aren't the right choice for everyone, but they can be a worthwhile investment. The main benefits are:
- Permanent death benefits. Unlike term life insurance which expires after a certain number of years, whole life insurance pays out no matter how long you live.
- Cash value. Whole life insurance includes a cash value that is invested and increases over time. The insured can borrow against this amount or use it during life if needed.
- Tax benefits. Dividends and interest on the policy's cash value are tax-deferred, making them a potentially valuable investment tool. The insured may be able to borrow money from the policy's cash value without tax consequences.
Whole life policies are more expensive than term life policies and may not be the best option for a person who needs basic life insurance. The cash value typically takes a decade or more to accumulate, which can be a downside, especially for older adults. Whole life insurance may be a good investment for people in the following situations:
- A person who is young enough to allow the policy's cash value to grow
- Those who wish to have life insurance in place no matter how long they live
- Someone who has maxed out, or expects to max out, retirement accounts
If you can pay the higher average cost of whole life insurance and are looking for a new long-term investment for your family, whole life insurance may be a good option.
