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The average cost of life insurance

The average cost of life insurance varies depending on many factors, including the type of policy and the coverage that was selected. The two basic types of life insurance polices are term life and whole life. The cost of these polices will vary because a whole life insurance policy has a savings benefit and a term life insurance policy does not. However, the average costs of these policies depends on what an insured person needs for coverage.

Policy Differences

Differences between a term-life policy and a whole-life policy result in a different average cost. Term life pays only a death benefit to a beneficiary. A whole life insurance policy has an investment benefit that puts money in bonds or money market funds. Individuals can also borrow against a cash value that a whole life insurance policy provides.

Hidden Costs

Individuals that choose to purchase a whole-life insurance policy might have hidden or additional costs that are included with a policy. This includes the cost of the insurance and the portion of the policy that provides the investment. A whole-life policy also has fees and agent commissions that add to the cost of the premium. Term-life insurance policies do not have any additional fees beyond the premium an individual pays for their policy.

Pricing Factors

The price for a whole life or term-life insurance policy is determined by many factors, including the coverage on a policy and the age of the insured. The price for a life insurance policy is also affected by an insured's smoking status and the results of a health exam. Individuals that do not smoke and are in better health are going to have a lower premiums than people who smoke or have health issues. One benefit with both types of policies is that the monthly payment amount can be locked in for the life of the policy.

Whole Life Insurance Price

The average coverage for a whole-life insurance policy is about £162,500, as of August 2009. This amount of coverage can have a premium that can range from £780 to more than £1,300 a year depending on the specific criteria for each individual. Keep in mind that a portion of the premium pays for the coverage. Another portion will add to the cash value of the policy. There will also be administrative fees and commissions that are included with the premium payment.

Term-Life Insurance

Term-life insurance is priced in much the same way as a whole-life insurance policy. One difference is there are no additional costs beyond the premium and agent commissions. An individual that has a 10- to 20-year term with an average coverage amount of £162,500 can pay £195 to £325 a year. A term-life insurance policy will usually come with an option to renew the policy for an additional term for the same price if the policy has a renewable guarantee.

About the Author

Cameron Easey has over 15 years customer service experience, with eight of those years in the insurance industry. He has earned various designations from organizations like the Insurance Institute of America and LOMA. Easey earned his Bachelor of Arts degree in political science and history from Western Michigan University.

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