How Much Does Life Insurance Really Cost?

Transcript of Podcast Episode 381

According to a survey by LIMRA, a life insurance trade organization, and Life Happens, an industry nonprofit, younger Americans tend to overestimate the cost of life insurance to a startling extent. Surveyors asked people aged 18 to 30 how much they thought a 20-year term life insurance policy would cost. The estimates were off-base. They averaged between 10 and 12 times the actual cost.[1]

This is a common misconception. A surprising number of people, particularly younger Americans, believe that life insurance is more expensive than it actually is. The perceived cost was cited as a reason why many Gen Z and Millennial adults, who generally recognize the need for life insurance, do not have it.[2]

Why do people get the numbers so wrong? According to author Dan Kraft at Life Insurance News, the answer might be found by studying behavioral economics and the concept of “anchoring.” “When consumers think of life insurance, they anchor the idea to big, long-term expenses—mortgages, car payments or medical bills. The assumption becomes: If it’s long-term, it must be expensive.”[3]

According to NerdWallet, if you’re a 30-year-old in good health, the average cost for a $500,000 20-year term life insurance policy is $215 per year for males, and $194 per year for females.[4] In other words, less than $20 per month. Keep in mind that these are average rates for non-smokers. If you smoke, the rates are likely going to be considerably higher.

Compare that to the cost of a cup of coffee, which averages $3 to $4 at Starbucks, depending on the location, size and type.[5] So if you’re getting coffee more than 6 or 7 times a month, a life insurance policy could be cheaper.

Streaming services are another example of something that can be more expensive than life insurance. The average cost is $70 per month, per household.[6] What this means is that even though many don’t realize it, a small adjustment in your discretionary spending could help provide you with peace of mind and a more secure future for you and your family.

But of course, we’re talking here about a term life insurance policy, and term policies expire. How much does a permanent life insurance policy cost? When it comes to whole life insurance, the average annual cost is $3,662 for men age 30, and $3,292 for women.[7] That’s considerably more, but not as much as some might expect.

And in the long run, buying life insurance younger may, in fact, be less expensive. By the time your first term life insurance policy expires, the next one is going to cost more, simply because you’re older. And that assumes you can even qualify medically for a new policy. Any adverse health development over that initial 20-year period could make it much more expensive—or even impossible—to buy a new policy.

Also, whole life insurance policies can accrue a cash value, which a term life insurance policy doesn’t. In certain circumstances, you may be able to access the cash value in the policy if you need to, by taking withdrawals or policy loans. The net cost, or difference between premiums paid and cash value, could be considered as the true out of pocket cost of the policy. In some cases that is less than a term policy, and for permanent coverage.

But remember that with all types of life insurance—whether term or permanent—the rates go up as you get older. Your second term life insurance policy is very likely to cost a lot more than the first one, even if your health stays the same. But whole life insurance gives you the chance to lock in those lower rates for life. It may cost more now, but with most policies the premium stays the same for life. If you choose a whole life insurance policy, someday you may be glad you did.

These are broad guidelines and policy contracts can have different characteristics, even if they’re the same basic type of policy. So be sure to compare your options carefully.

Your Security Mutual Life insurance agent can help. Your Security Mutual Life insurance agent can augment or assemble your team and coordinate with your attorney and tax professional to review your situation and to determine the insurance plan that will best suit your needs and objectives.

Regardless of which type of policy you choose, perhaps the most important decision you can make is to simply get started. As with so many other things, the longer you wait, the more it could end up costing you.

[1]LIMRA. “Adults Age 30 and Younger Overestimate Life Insurance Cost by 10–12 Times.” LIMRA.com.  https://www.limra.com/en/newsroom/news-releases/2025/adults-age-30-and-younger-overestimate-life-insurance-cost-by-1012-times/ (accessed March 18, 2026).

[2] Id.

[3] Kraft, Dan. “Is life insurance cheaper than coffee?” Insurancenewsnet.com. https://insurancenewsnet.com/innarticle/is-life-insurance-cheaper-than-coffee (accessed March 20, 2026).

 [4] Iervasi, Katia. “Average Life Insurance Rates for March 2026.” Nerdwallet.com. https://www.nerdwallet.com/insurance/life/learn/average-life-insurance-rates (accessed March 19, 2026).

[5] HackTheMenu. “Starbucks Menu Prices (2026).” Hackthemenu.com. https://hackthemenu.com/starbucks/menu-prices/ (accessed March 20, 2026).

[6] Lee, Wendy. “Consumers are spending $22 more a month on average for streaming services. Why do prices keep rising?” The Los Angeles Times. https://www.latimes.com/entertainment-arts/business/story/2025-11-21/why-do-streaming-prices-keep-rising-disney-netflix-paramount-what-to-know (accessed March 20, 2026).

[7] Iervasi, Katia. “Average Life Insurance Rates for March 2026.” Nerdwallet.com. https://www.nerdwallet.com/insurance/life/learn/average-life-insurance-rates (accessed March 19, 2026).

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