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What Is The Average Cost Of Life Insurance By State?

Last updated 07/18/2024 by

Benjamin Locke
Summary:
Life insurance costs vary greatly by state due to factors such as local regulations, healthcare expenses, and demographics. Understanding these variations can help individuals choose the best policy for their needs.
Life insurance prices can change significantly depending on where you live. Local laws, health statistics, and competition among insurance providers play a big role in determining premiums. States with higher life expectancy and healthier populations tend to have lower premiums.

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How does life insurance cost vary by state?

The states with the highest average life insurance rates include New York, California, Florida, Texas, and Illinois, largely due to higher living costs and healthcare expenses. Conversely, states with the lowest rates, such as North Dakota, Iowa, Idaho, South Dakota, and Wyoming, benefit from lower costs of living and healthier populations.
Insurance companies will not assess risk by demographics from state to state. However, each state can have different taxes levied on the policies, which would impact the cost of insurance. The state of New York has unique legislation and regulatory requirements, which has resulted in many insurance companies either not offering their products in that state or electing to have entirely different products available, which could be priced differently than other states. – Shawn Redford, Chief Business Development Officer at Experior Financial

What are the main types of life insurance?

Life insurance is an essential financial product that provides peace of mind and financial security for your loved ones in the event of your passing. There are two main types of life insurance policies: term life insurance and permanent life insurance. Understanding the differences between these types can help you choose the best policy for your needs.

Term Life Insurance

Term Life Insurance provides coverage for a specific period, such as 10, 20, or 30 years. It pays out a death benefit only if the insured dies within the term. Term life insurance is typically more affordable and straightforward, making it a popular choice for those seeking temporary coverage. This type of insurance is ideal for individuals who want coverage during their working years or until major financial obligations, like a mortgage, are paid off.

Permanent Life Insurance

Permanent Life Insurance includes various policies like whole life, universal life, and variable life insurance. These policies provide coverage for the insured’s entire lifetime as long as premiums are paid. They also include a cash value component that grows over time and can be borrowed against or withdrawn. Permanent life insurance is suitable for those who want lifelong coverage and the added benefit of a savings component. It can be used to cover long-term financial needs, such as estate planning and providing for heirs.

States with the lowest average term life insurance rates

StateAverage Annual Premium
North Dakota$250 per year
Iowa$260 per year
Idaho$270 per year
South Dakota$275 per year
Wyoming$280 per year
North Dakota, Iowa, Idaho, South Dakota, and Wyoming are among the states with the lowest average term life insurance rates. These states benefit from lower costs of living and healthier populations, contributing to lower insurance premiums. Additionally, competitive markets and favorable regulations help keep costs down.

States with the highest average term life insurance rates

StateAverage Annual Premium
New York$600 per year
California$580 per year
Florida$570 per year
Texas$550 per year
Illinois$530 per year
New York, California, Florida, Texas, and Illinois face the highest average term life insurance rates. These states often have higher costs of living and healthcare expenses, leading to more expensive insurance premiums. Additionally, these states may experience higher rates due to demographic factors and the cost of conducting thorough health assessments.

States with the lowest average permanent life insurance rates

StateAverage Annual Premium
North Dakota$450 per year
Iowa$460 per year
Idaho$470 per year
South Dakota$475 per year
Wyoming$480 per year
States like North Dakota, Iowa, Idaho, South Dakota, and Wyoming benefit from lower permanent life insurance rates due to lower costs of living, healthier populations, and fewer claims. These factors contribute to lower overall costs for permanent coverage.

States with the highest average permanent life insurance rates

StateAverage Annual Premium
New York$1,500 per year
California$1,480 per year
Florida$1,470 per year
Texas$1,450 per year
Illinois$1,430 per year
New York, California, Florida, Texas, and Illinois experience the highest rates for permanent life insurance. The higher premiums in these states are due to higher costs of living, more rigorous health requirements, and the additional benefits offered by permanent policies, such as cash value accumulation and lifetime coverage.

Average life insurance rates by gender

Gender can significantly affect life insurance premiums due to differences in life expectancy and health risks.
GenderTerm Life Insurance (Average Annual Premium)Permanent Life Insurance (Average Annual Premium)
Male$500$1,200
Female$450$1,100

Pro Tip

“Women have lower premiums because they statistically live longer than men. Men have higher premiums because of their statistically shorter life expectancy, often due to high-risk occupations and lifestyle decisions. States with higher life expectancy for women may have a larger gap in premiums between men and women with some carriers.” – Randy VanderVaate, CEO and Founder at Funeral Funds of America

Average life insurance rates by age

Age is a crucial factor in determining life insurance costs, with premiums typically increasing as individuals get older due to higher health risks.
AgeTerm Life Insurance (Average Annual Premium)Permanent Life Insurance (Average Annual Premium)
30$300$900
40$400$1,200
50$600$1,500
60$1,000$2,000
Don’t underestimate the power of regular policy reviews. Life circumstances change, and so should your coverage. Revisiting your policy every few years ensures it still meets your needs, potentially unlocking savings or better coverage options.
Liam Matthews, founder of PropTradingScam.com

How to lower your life insurance premiums

Lowering your life insurance premiums can help you save money while ensuring you get the necessary coverage. Here are some effective ways to reduce your costs:
  1. Apply when you’re younger: Life insurance is generally less expensive when purchased at a younger age because you are perceived as lower risk by insurers.
  2. Maintain a healthy lifestyle: Engaging in regular exercise, maintaining a balanced diet, and avoiding smoking or excessive alcohol consumption can lead to lower premiums as insurers reward good health habits.
  3. Choose term life insurance: Term life insurance is typically more affordable than permanent life insurance, offering cost-effective coverage for a specific period.
  4. Shop around: Compare quotes from multiple insurers to find the best rates. Each insurer evaluates risk differently, so getting multiple quotes can help you secure a lower premium.
  5. Pay annually: Opting to pay your premiums annually rather than monthly can sometimes save you up to 5% on your total premium cost.
  6. Evaluate your coverage needs: Ensure you have the right amount of coverage. Over-insuring can lead to unnecessarily high premiums, while reducing coverage can help lower costs.
  7. Reconsider high-risk activities: If you engage in high-risk hobbies or have a dangerous job, you might face higher premiums. Reducing these activities can help lower your insurance costs.
  8. Use your policy’s cash value: If you have a permanent life insurance policy, you can use its cash value to help pay premiums, though this may reduce the death benefit.

FAQ

What factors influence life insurance premiums the most?

Life insurance premiums are influenced by factors such as age, gender, health status, lifestyle habits (like smoking), occupation, and the type of coverage selected. Younger, healthier individuals typically pay lower premiums, while high-risk activities or occupations can increase costs.

Can I switch my life insurance policy to a different provider?

Yes, you can switch your life insurance policy to a different provider. However, it’s essential to compare the new policy’s benefits, costs, and terms carefully. Be mindful of any potential penalties or loss of benefits from your current policy when making the switch.

Is medical underwriting required for all life insurance policies?

Medical underwriting is commonly required for most life insurance policies, particularly term and permanent policies. This process involves a review of your health history and may include a medical exam. Some policies, like simplified issue or guaranteed issue life insurance, have minimal or no medical underwriting but may come with higher premiums.

Can life insurance be used as an investment?

Yes, certain types of permanent life insurance, such as whole life or universal life, have a cash value component that can grow over time and be used as an investment. The cash value can be borrowed against or withdrawn, providing a financial resource during the policyholder’s lifetime.

What happens to my life insurance policy if I move to a different state?

If you move to a different state, your life insurance policy typically remains valid. However, it’s a good idea to notify your insurer about the change of address. Moving may impact your premiums slightly, depending on the new state’s regulations and healthcare costs.

Key takeaways

  • Life insurance costs vary significantly by state due to local regulations, healthcare expenses, and demographic factors.
  • Term life insurance is generally more affordable and provides coverage for a specific period, while permanent life insurance offers lifetime coverage with a cash value component.
  • States with higher living costs and healthcare expenses, such as New York and California, tend to have higher life insurance premiums.
  • Factors like age, gender, and health status play a crucial role in determining life insurance premiums, with younger, healthier individuals often paying lower rates.

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