?How much does a $500,000 life insurance policy cost

 

How much does a $500,000 life insurance policy cost?

Key points

A $500,000 10-year term life insurance policy costs an average of $12 per month for a healthy 30-year-old who doesn’t smoke. 

Term life insurance is usually less expensive than whole or universal life insurance. 

Shopping around is key to finding the best life insurance for your needs and budget. 

You may be interested in life insurance but uncertain about how much coverage to buy.

“Like most financial decisions, when it comes to life insurance, no one size fits all,” said Tim Heslin, president of life insurance at Corebridge Financial. “If you need [life] insurance, you need to consider the level of income you’re looking to replace as well as how much protection you can afford.”

Understanding how much you can expect to pay for a $500,000 life insurance policy can help you decide if this coverage amount might be right for you. 

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Here’s how much a $500,000 term life insurance policy costs on average for a 10-year term for a healthy nonsmoker, according to our analysis of term life insurance rates.

30 years old: $12 per month, or $114 per year.

40 years old: $16 per month, or $192 per year.

50 years old: $37 per month, or $444 per year.

Term life insurance locks in your rates for a level term period. You might purchase a 10-year, 20-year or 30-year term life insurance policy, depending on your needs. When your level term period ends, you may be able to renew your policy annually, but you’ll likely see higher rates each year. 

If you pass away while your policy is in force, your insurance company will pay out a death benefit to your beneficiaries. However, if the policy expires before you die, your beneficiaries won’t receive a death benefit. 

Average cost for a $500,000 life insurance policy, by age and gender

Life insurance companies use a variety of factors to determine how much your life insurance will cost. Health is one of the most important, though age and gender are also considered. 

The younger and healthier you are, the less expensive life insurance tends to be. In the case of a term life insurance policy, your choice of term can also make a difference in regard to what you’ll pay. Here’s how the average cost of a $500,000 term life insurance policy varies by age and gender. 

Monthly cost for $500,000 10-year term life insurance policy Monthly cost for $500,000 20-year term life insurance policy Monthly cost for $500,000 30-year term life insurance policy

Interested in permanent life insurance? Best whole life insurance companies

When should you buy a $500,000 life insurance policy? 

In terms of when to buy, getting life insurance is something most people are better off doing sooner rather than later. 

“Some may think they’re too young, but there are advantages to getting life insurance early,” said Heslin. 

The earlier you buy coverage, the lower your premiums are likely to be. “More than that, having a life insurance policy in place can give you peace of mind that — come what may — there can be money in place to help care for your family,” he said. 

A simple cost comparison can give you an idea of how much you might save by purchasing a $500,000 policy now instead of waiting. 

Assume that you’re a 30-year-old, healthy male and you’re interested in getting a 20-year, $500,000 term life policy. If you buy it now, you’ll pay around $19 per month on average, or $228 per year. Waiting until age 50 to buy the same policy and you’ll be paying around $70 per month on average, or $840 per year. 

Deciding when to buy a $500,000 life insurance policy, or any other level of coverage, begins with assessing your financial situation. You might consider buying a policy of this size if you:

Are married or have children. 

Have assumed or plan to assume responsibility for aging parents.

Run a business.

Have a large mortgage.

Have substantial debts that you don’t want to leave behind for anyone else.

A $500,000 life insurance policy could make sense for someone who’s the primary income earner in their household, but it may also be appropriate for a stay-at-home parent. If that parent were to pass away, a $500,000 life insurance policy could provide some breathing room for the remaining parent by paying off the mortgage or funding the costs of professional housekeeping and child care. 

Is a $500,000 life insurance policy the best for you? 

Whether a $500,000 life insurance policy is best for you can depend on the specifics of your situation. For someone, $500,000 in life insurance might be more than enough while others may benefit from having a $1 million life insurance policy instead. 

Asking yourself what your policy might need to do can help you narrow down what amount of coverage is appropriate. For example, a $500,000 policy could be used for any of the following:

Paying off a mortgage.

Paying off other debts, such as credit cards, car loans or student loans.

Covering college expenses for one or more children.

Providing financial support to aging parents if you outlive them.

Funding the cost of funeral and burial expenses.

Allowing your spouse or partner to enjoy a comfortable retirement.

Providing care for a special needs dependent after you’re gone.

It’s also helpful to consider what level of coverage you can afford. Again, you’re better off getting life insurance when you’re young and healthy, as that can save money on premiums. 

As far as whether you should be looking at term or permanent coverage goes, that really depends on the reason you’re buying life insurance and your budget, according to Eleanor I. Johnson, financial wellness expert and founding principal at Highland Capital Brokerage. She offers a few guidelines for deciding which type of life insurance to buy. 

If you only need insurance for a specific time and need, you might opt for term insurance to match that obligation.

If you need insurance coverage for a long-term objective but have a limited budget, consider buying a term policy that’s convertible to permanent life insurance later and purchase the longest level term length that you can afford.

If you’d like to add a long-term care rider to your policy, consider a permanent policy that includes the ability to access tax-free death benefits early if you experience a long term care event.

If you’d like life insurance coverage that is available regardless of how long you live, look at permanent insurance options.

If building cash value is the goal, consider permanent life insurance. 

Regardless of when you decide to buy a policy, it’s wise to compare life insurance quotes to find coverage that aligns with both your needs and budget. And, Heslin advises working with a financial professional, who can help you decide how your life insurance policy will fit with your entire financial plan.

Methodology

We analyzed rates provided by AccuQuote, a national online life insurance agency that works only with top carriers. Term life insurance rates are for nonsmokers of average height and weight who are in excellent health. Your rates will depend on your age, gender, health and other factors.

Frequently asked questions (FAQs)

What is the average monthly cost of a $500,000 life insurance policy?

The average monthly cost of a $500,000 term life insurance policy with a 10-year term is $12 per month, or $144 per year, for a 30-year-old, healthy non-smoker. 

How much you’ll pay for $500,000 in life insurance can depend on your age, the policy term, your health and your gender. 

Premiums tend to be higher if you’re purchasing a permanent policy, such as whole life insurance or universal life insurance. 

Does gender affect your life insurance rates?

Yes, gender can affect your life insurance rates. Statistically, women tend to outlive men so the risk of having to pay out a death benefit for a term life policy is lower. Accordingly, insurance companies may charge women less for coverage. 

Here’s how much the cost difference can add up when comparing 20-year term life insurance rates for 30-year-old males versus females of the same age. 

Age 30 – Men pay 19% more on average, or $228 per year versus $192 per year for women. 

Age 40 – Men pay 17% more on average, or $336 per year versus $288 per year for women.

Age 50 – Men pay 27% more on average, or $840 per year versus $660 per year for women. 

Note that life insurance companies typically use the gender assigned at birth when setting premium rates, though some may use your chosen gender identity instead. 

What is the cash value of a $500,000 life insurance policy?

Cash value doesn’t accumulate in a term life insurance policy but it can in a whole life or universal life insurance policy. 

The cash value component of life insurance can earn interest and you may be able to borrow against it or withdraw it. The amount of cash value you can accumulate in a $500,000 life insurance policy may depend on what type of coverage you have and how interest is earned.