What does life insurance cost?  Most people think life insurance costs 3x or 4x more than it actually does. And we don’t blame them. After all, life insurance costs are a bit of a black box. You see the commercials on TV and the billboards on your commute to work. But just like the ads for designer handbags and luxury watches, none of them tell you the price. (Maddening, isn’t it?) In a world of one-click online shopping, pricing transparency almost seems like a requirement for brands that want to stay in the game. So why is life insurance pricing still such a mystery?

Why you don’t typically see life insurance prices

Comparing online life insurance rates may seem like a good way to estimate the cost of coverage. And it can indeed give you a rough idea of what you might pay in premiums. But remember that life insurance prices are based on the amount of coverage a policy provides. So if you don’t know how much coverage you need, the prices you see online will be as meaningless to you as the barcode on your coat check ticket. That’s why it’s much better to build a customized life insurance plan that fully meets your needs and your budget.

Let’s talk about price. But instead of giving you a gigantic table in 6-pt font, let’s walk through some case studies. They’ll give you a sense of the coverage different types of people need and the associated monthly price.

Case 1: Katie (newly married with a $500,000 mortgage)

Let’s talk about Katie first. We’ll review a few of her personal characteristics to come up with her insurance plan.

Katie and her partner are in their early 30s with no kids. They have a household income of about $150,000 (before tax). They’ve recently put down a big down payment on their house and have a remaining mortgage of $500,000. Their monthly expenses are about $7,000/month. They also both have existing life insurance coverage through work ($100,000 each).

How much life insurance does Katie need?

We recommend $375,000 of 20-year term life insurance.

How was this calculated?

We first calculated Katie’s total financial obligations (all debts and her partner’s expenses until death). We then offset this based on her partner's future expected income, family savings, and her existing life insurance through work.

What does life insurance cost?

About $22–$24/month depending on the insurer she chooses. See, not too bad.

Case 2: Thomas (married with 2 children and about $300,000 left on his mortgage)

Next, we have Thomas. Here are some of his personal characteristics:

Thomas and his wife are in their early 40s. They have 2 children aged 6 and 8. Their household income is about $200,000 (before tax). They have $50,000 of retirement savings in RRSPs and $50,000 of non-retirement savings. Beyond the $300,000 left on their mortgage, they have another $25,000 line of credit for a new pool. Their monthly expenses are about $11,000/month (includes housing, two car payments, and two big family trips a year). Finally, Thomas has about $150,000 in life insurance through work.

How much life insurance does Thomas need?

We recommend $825,000 of 20-year term life insurance.

How was this calculated?

We first calculated Thomas’s total financial obligations (all debts, his partner’s expenses until death, and his children's expenses until age 25). We then offset this with his partner’s future expected income, family savings, and his existing life insurance through work.

What does life insurance cost?

About $90–$95/month depending on the insurer he chooses. Remember, Thomas is now in his 40s and his coverage amount was higher, so the life insurance cost per month is higher than Katie.

Laura McKay

COO & Co-Founder

Laura brings 7 years of experience working in insurance & strategic operations as a management consultant at Oliver Wyman, after experiences at Manulife and Munich Re. In 2017, she launched a successful initiative for the World Economic Forum focused on innovation in insurance, working closely with insurers, tech pioneers, and policy-makers.

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