How Much Does Life Insurance Cost?

That’s a good question. The answer—as with so many things in this world—is, well, that depends. If you’re the one paying the premium and you’re sending a hunk of change to a life insurance company every month, you might think, “Yeah, this is expensive.”

On the other hand, if you are the beneficiary—the precious, beloved spouse of the one paying the premium—you could well think, “No way is this expensive! If my loved one passes away, no amount of money will take away our family’s sense of loss, but money can insure we’ll be able to stay in our home, that we don’t have to go on food stamps, and that our children will still be able to go to college. It’s a bargain!”

Highs and Lows of Life Insurance Premiums

So, how much does life insurance cost?

Your premium could be as low as about $10 a month for a basic term policy, if you’re a 21-year-old healthy woman, and if you don’t need coverage for more than five years, and if you think your beneficiary won’t need more than $100,000 to replace your financial contribution when you’re gone.

But before you stop there and say, “Oh, okay. I’ll budget $10 a month,” notice the three “ifs” in that sentence. Then scroll down to the next section, Should You Even Be Considering Life Insurance? for some subjects to discuss with your loved ones.

Your premium could easily be several thousand dollars a month, particularly if you want more features in your life insurance policy, or if you’re older, perhaps not as healthy, or you want your beneficiary to have more. See “Steps to Follow to Determine How Much Life Insurance Coverage You Need” below, to estimate your beneficiaries’ needs.

Should You Even Be Considering Life Insurance?

Let’s start at the very beginning—a very good place to start.

We’ll assume that you’re considering a life insurance policy on your life. If you’re considering coverage on someone else’s life—a spouse, for example—adjust the questions accordingly.

If you have no minor children and no dependents who depend on you for support, the most obvious reason for having life insurance—to provide for them financially—may not apply to you. There may be other reasons you’ll find a life insurance policy ideal (and we’ll look briefly at those reasons in this article), but first, we should address the needs of people who do have others dependent on them for financial support.

Steps to Follow to Determine How Much Life Insurance Coverage You Need

Here are the steps to follow to get some idea of how much life insurance you may want to consider. Take it slowly, one step at a time. And realize that even when you arrive at a grand total, it’s really only an estimate.

A good life insurance agent will lead you through an exercise similar to this, but you should do a little planning first, in the quietness of your own kitchen, before you begin planning with a life insurance agent. But show your agent the worksheet we’ll help you create (below). Your agent will be impressed, because most people can’t be bothered—or don’t know how—to do their own thinking in this regard.

Step #1: Who needs your help?

Exactly who is depending on you now—and who else is likely to need your help in the foreseeable future?

The answer could include your children, perhaps a parent who you reasonably expect may need help in the next decade or so, maybe even nieces or nephews, if something happened to their parents and you’ve stepped up to help.

Make a list. List their names down the left side of a sheet of paper, and leave plenty of room to the right of each name for you to add additional information about your current and potential dependents.

Step #2: How much will they need?

Get a handle on this by asking yourself how much you provide for your dependents now, on a regular basis.

Consider how much you spend monthly for your household, then back out the amount you figure goes to provide for you—your share of the groceries, your clothing, vehicle, and so forth. Don’t include the amount spent for your portion of the house; that won’t likely go down, even if your side of the bed is empty.

Check into other sources of funds. Social Security survivors and dependents benefits will probably be available, and you may also be covered by union or management pensions, or a group life insurance plan. Consider whether or not a rich uncle or wealthy grandparents would be inclined to help provide for your children in case of disaster.

Once you’ve come up with a rough total, divvy it up among your dependents, and write an annual amount on the line for each one.

Step #3: How long will they need your help?

How long will each of your dependents and potential dependents need financial support, if something were to happen to you tonight?

When assessing your life insurance needs, always begin with the assumption that something will happen to you tonight. If you plan for the worst-case scenario, you’ve done the best planning you can.

You’re going to have to do some guessing, especially in the case of potential dependents. You may assume that Granny will be fine for another three or four years, but might need help after that, and that she could live to be 100. (Adjust your projections based on your knowledge of Granny’s health.)

Do the math (amount per year times the number of years), and put the total sum for each dependent on each line.

Now write down the total for that column of figures and draw a circle around it.

Step #4: Will your spouse continue to work?

Whether or not your spouse is working now, they will need time off after your death—particularly if it’s tonight (see box, above)—to hold tight to the children, to grieve, to handle arrangements and paperwork. And they’ll probably only be able to move at half-speed for months.

Plan to give them some time. At a minimum, assume your spouse will not go to work for six months following your death.

We know these things are difficult to think about. But they are much easier to think about now—while you’re part of the conversation—than they will be later, when you’re not around.

Think about them now.

Estimate the number of years from the time your spouse resumes work until the last dependent is no longer expected to need financial support. Multiply that number by an estimate of your spouse’s annual earnings (a larger number if your spouse is a brain surgeon; a smaller number if your spouse is a teacher’s aide).

Subtract that total from the number in the circle. That is a very, very rough approximation of what it will take to provide for your family, if something dreadful were to happen to you tonight.

On the one hand, that’s probably more money than you thought. On the other hand, you didn’t realize you were so valuable, did you? Congratulations.

Should You Consider Insurance for a Non-Working Spouse?

If your spouse stays home, perhaps to raise the children, what will you do if something happens to your spouse? You’ll need to provide for child care. That costs money. Insurance for your spouse can cover that.

Should You Get Insurance on the Kids’ Lives?

Before you brush that off, consider the observation made by a caring, loving self-employed father of two young boys: “If something were to happen to either one of our boys, I know my wife and I wouldn’t be able to function for months. My business—and our income—would go to pot.”

You may be amazed at how little it costs to add a children’s coverage rider to a parent’s policy. Frequently it’s less than $25 per month—to cover all your kids. Check it out.

Other Reasons to Consider Life Insurance

If you support a religious or charitable organization, you can leave a legacy by designating that organization as the beneficiary of your policy, whether or not you want life insurance for any other reason.

Also, while life insurance is most often thought of in terms of its death benefits, wise individuals and families also explore the living benefits of a properly designed life insurance policy. Don’t overlook our article on a life insurance policy’s living benefits—whether or not you have dependents.

Download a free Report here that reveals how a little-known type of high early cash value, low commission whole life policy lets you fire your banker, bypass Wall Street and take control of your own financial future. You’ll also get a free chapter from Pamela Yellen’s New York Times best-selling book on this subject.

Do Something Now!

Talk with a qualified life insurance agent. They’ve been through this with many families.  They can review your estimates, perhaps think of sources of income you hadn’t thought about—or expenses you overlooked. It’s worth it to your family to get a free, no-obligation analysis of your personal situation.

Do it now.

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Continue to the Table of Contents for the No-Nonsense Life Insurance Guide