How Much Does the Average Person Spend on Life Insurance?
It’s important to have life insurance, especially if you have dependents that you need to provide financial security to should something happen to you. But how much do most people spend on life insurance in the United States? The average amount spent depends on a number of factors, including whether it’s term or whole life, how long you purchase it for and your age and health condition at the time of purchase and among many other things. Find out below how much the average person spends on life insurance per year and how this varies depending on different factors.
1) What is life insurance
Life insurance, also known as life assurance in some countries, is a form of protection against death. It pays an amount to a beneficiary in the event of one's death or upon his/her demise. Generally, life insurance can be divided into two categories: Permanent and Term. Permanent life insurance provides its owner with lifelong coverage in exchange for annual premiums. Term life insurance covers someone for a specified period of time and then expires unless it's renewed by payment of more premiums. Getting a life insurance policy isn't something to take lightly, however. There are many things to consider—some of which you may not have even considered. This comprehensive guide will cover everything you need to know about life insurance, from how much does it cost, who should get it, when is it needed and more. This guide will also explain what term vs whole life insurance means and which one is right for you. Life insurance is an important aspect of financial planning that's often overlooked until its too late. It can provide much-needed protection in case anything happens to your income or family unit.
2) Determining how much you need
Determining how much life insurance you need is a matter of careful estimation and some mathematics. Simply by understanding the term 'life insurance average cost', you should have a pretty good idea of your own needs. For example, if there are two main breadwinners in your household, it might be wise to purchase double the amount that one breadwinner would need. In order to determine how much coverage you want (or need), take into consideration these three factors:-The age at which beneficiaries will receive their inheritances -The difference between what your estate will be worth if you live versus what it'll be worth if you die before that point -Which spouse inherits what when someone dies prematurely
3) The 3 different types of policies
There are actually three main types of life insurance policies that exists and they are: term, whole, and universal. A term life policy is best for individuals who know they will need life insurance only for a certain period of time. A whole life policy is best for those that want coverage to last as long as they live. Universal policies combine aspects of both and have a variety of investment options. Your age, financial situation, health history, and needs determine which type you should choose. The average cost of a life insurance policy can depend on these factors as well as your gender, occupation, home ownership status, location, and length of the contract.
4) Why getting more coverage than you need isn’t a bad idea
If you have a life insurance average cost of $1,000 per month, that’s approximately $12,000 per year or $144,000 over 10 years. In addition to not having enough money for funeral expenses and burial costs, most people would want to leave behind something for their spouse and children so they can start off without additional financial stressors. If a person who earns an income of $60,000 annually buys a policy worth at least ten times his annual income ($600k), he can ensure that his family is provided for after he passes away.
5) Term vs Whole
Term life insurance is a lot more affordable than whole life insurance, but it only protects you for a set period of time. Term life insurance can be used as a way to cover budget gaps for times when you don't have anything to pass on in your estate. You might choose term life if you're relatively healthy and not worried about paying premiums all at once. Whole life insurance is what most people think of when they hear life insurance. That type of policy covers all sorts of things, including covering the cost of funeral expenses and providing some cash value that's tax-free. If you're going with whole life insurance, be sure that you compare a lot before making your final decision. Life insurance costs can really differ based on a number of factors. They can vary based on your age, health and how much coverage you decide to get. If you choose term life, expect to pay more than if you go with whole life. Whole life insurance is available for everyone, whereas there are restrictions for getting term life. For example, it might be tough for someone under 20 years old to get a term policy due to eligibility requirements in place by most companies. Keep that in mind if you're young and need coverage now but don't want to start paying big premiums later when you're healthy again.
6) Examine your priorities
If you have a family to care for and dependents who rely on your income, life insurance is a must. The average person spends $5,000 to $8,000 a year to cover their family's life insurance needs. You can buy an individual plan that costs less or get a group policy from your employer. There are also ways to find cheaper rates if you're healthy and at lower risk for health problems like smoking. A whole life insurance policy may be more expensive but provides more coverage than term insurance over the long run.The cost of life insurance may be discouraging but it will give you peace of mind that your loved ones will be taken care of in case something happens to you.Life insurance is available in many forms, and what’s right for you depends on your specific situation. There are a few major categories of life insurance including universal, term and whole life. The kind that you choose depends on factors like: your goals, financial situation and health. Below we take a look at each form so you can get a better understanding of what they entail and when they might be best suited to your needs.
