How Much is Life Insurance and How Much Do I Need?


A recent survey found the average American
overestimated the cost of life insurance by 300% and nearly half of millennials thought
premiums were 500% more than they really were. How much does life insurance cost and how
much do you really need? We’re talking life insurance questions today
on Let’s Talk Money! Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s Talk Money! Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. How much is life insurance and how much do
you really need? These were two of the most frequent questions
I got after our last video covering insurance misconceptions. That question about how much does life insurance
cost was a big one with a study from the insurance industry finding that people on average think
a policy costs three-times more than actual quotes and 44% of millennials over-estimating
the cost of insurance by five-fold. In fact, a 2015 study showed people estimated
the premium for a healthy 30-year old between $400 to $1,000 a month when the actual average
is closer to $13 a month. I was as surprised as you were in our last
video about those misconceptions. I didn’t even think about life insurance
until my 30s but when I did, these were my two biggest questions. How much is it and how much do I really need? That’s why I’m teaming up with Quotacy,
the country’s leading broker for buying life insurance online, to get a real answer
to these questions. Over these three videos, we’ll be looking
at exactly how much life insurance you need, how much it costs and how to get the lowest
premiums by shopping your life insurance policy online. Quotacy has built out an online process that
really takes the guesswork out of insurance. The application takes less than five minutes
and then gets shopped around to 20 carriers for the best policy. In fact, you’ll be able to get estimates
on your premium in seconds with their pre-application process. The team at Quotacy works on salary instead
of commission so it’s there to find you the best policy, not the one with the fattest
kickback. I’ll cover more about Quotacy later but
I want to get to those two big questions so for now, I’ll leave a link in the video
description below to learn more and check your rate. I want to look at how much insurance costs
first, because honestly I think this is the most surprising. I’m going to use Quotacy’s pre-application
estimator to find a high and low rate for males and females at every decade. The estimator takes all of 30-seconds to use. You first put in how much coverage you want
and the term. Then some basic health information like height,
weight, whether you smoke, whether you’re on medication for blood pressure or cholesterol
and any history of cancer or heart disease in your family. The resource is then going to check some of
the largest carriers to estimate a premium. So to build out this chart of how much life
insurance costs for each decade, I went through the estimator 16 times. Each time I looked at a good health and poor
health scenario for each decade and for males and females. For the good health scenario, I assumed a
non-smoker and no health issues or family history. For our poor health scenario, I assumed a
daily smoker on medications for both blood pressure and cholesterol and a history of
heart disease…so yeah, this was one unlucky sucker. For our policy, I chose $300,000 in coverage
on a 15-year term life policy. One thing I want to point out, besides the
fact that these are estimates and your rate might be different, is that the rate we see
in each decade is if you’re getting a new policy at that point. This is important and something we talked
about in that previous video. The rate on a term life insurance policy stays
the same throughout that term. So if you get a quote for a 15-year policy,
that monthly amount stays the same for those 15 years. If you get a 25-year policy, the rate stays
the same for that period. Here I am in the estimator and I’m going
to spare you the full seven minutes it took to find all 16 life insurance quotes, which
actually isn’t too bad when you think about it. That’s literally less than half a minute
to get an estimate on life insurance and you get to see multiple quotes from some of the
largest carriers. For each of our scenarios, I used that same
15-year term life insurance policy for $300,000 coverage. I went through the good health and poor health
scenarios for males and females and noted the lowest and highest estimated monthly premium. And here we are with the finished table showing
how much a 15-year term life insurance policy might cost you for $300,000 coverage. Obviously we see the younger you are, the
less expensive it is to get insurance but there are a few really interesting things
we see in the table. First is that for the love of all that is,
take care of your health. You can’t change a family history of health
problems and it might be tough if you’re already on those medications but stop smoking
and get on an exercise program. Now I don’t want all the smokers or anyone
in less than perfect health out there to think these are going to be your monthly premiums. Remember, our poor health scenario for the
high estimate was a daily smoker on multiple medications AND a family history of heart
problems so most likely you’re going to see better numbers than this. In fact, Quotacy specializes in that 40% of
the population that isn’t in perfect health or that has special insurance needs. They have a team of brokers that can help
you find that best carrier for the lowest rate no matter what your condition. The table also shows the benefit of getting
insured early and locking in a lower premium. For example, we see in the chart that it costs
a health 45-year old male about $25.41 a month for a 15-year policy to protect their family
to the age of 60. I ran the estimate again and that same individual
could have gotten a 25-year term at age 35, so still protecting themselves to age 60,
and locked in a rate of $20.77 a month. What else do we see in the table. Well, it’s good to be a girl with women
saving from $10 to over a thousand a year versus males when it comes to insurance. But really for both sexes, we see that life
insurance really doesn’t cost that much. Even for an old-timer like myself approaching
mid-40s, I can get a $300,000 policy protecting my family until I’m 60 for less than a third
what it costs us to eat out at a restaurant. So now that we know about how much life insurance
costs, how much do you really need? We used that $300,000 policy as an example
but how do you know if that’s going to be enough…or not enough? First, it’s important to know WHY you’re
getting life insurance to understand better how much you need. Then we’ll talk about a basic rule for what
kind of policy you need and some things that might mean you need more or less. The top three reasons people give for buying
life insurance is final expenses, that average seven to ten thousand dollars in burial costs,
leaving something as an inheritance and protecting their family from the lost income. On top of this though, you want to include
savings and educational expenses. Yeah, that insurance policy needs to cover
living expenses from your lost income but do you want your family to squeak by or wouldn’t
you rather be able to help them save a little and pay for those college costs you were planning
on covering? Now the basic rule for insurance has always
been about 10-times your annual income. According to the U.S. Census, a median income
around 38,000 means we were just below on our example so maybe it should have been a
$380,000 policy. But you know, I hate these kind of one-size-fits
all estimates. It is so easy to take a few minutes, think
through just a few questions to decide how much insurance you need. This means looking at your current salary
and how much you’re able to save now. If your salary is covering living expenses
with savings to spare then maybe you don’t need that 10-times for a policy. On the other hand, if you’re barely scraping
by, not able to save anything for retirement or education, then you’ll probably want
more than 10-times. Does your spouse work and do you want them
to be able to do that if they lose your income? If so then you’ll almost definitely need
more than the simple 10-times rule. Life insurance doesn’t have to be a mystery
and it’s not nearly as expensive as you might think. What’s really expensive is gambling on your
family’s future when protecting them is so easy. Quotacy makes it easy to get your pre-application
quote to see how affordable life insurance can be and then the team works with you to
shop your policy around. I’m leaving a link in the video description
below so you can learn more so make sure you check that out. We’re here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making more money and making your money work for
you. If you’ve got a question about money, just
subscribe to the channel and ask it in the comments and we’ll answer it in a video.

8 comments

Hey there Devil Dog, I'm currently in the works for my life insurance license and already have my Health/Accident/Sickness insurance license with Nebraska and Kansas. I added these products to my corporate services as I discovered the vast majority of people's financial/credit woes was due to medical expenses and being underinsured.

I cannot express enough the importance of having health and life insurance and I wish more people understood it and talked about it.

Thank you for sharing this, for everyone subscribed to this man, please heed these words!

Can you look into Ozark national life insurance? I have been a member for 3 years now and as time goes on and I try to learn more about money, I'm starting to question if it is worth it or not.

Great video! I’ve never heard of Quotacy before. I’m amazed by how much some people spend on life insurance, especially whole life. Yikes! Our insurance is pretty cheap.

Thanks for an informative series. Besides price, what other qualities, like financial strength, should you look for in choosing a life insurance company?

It can be a better retirement vehicle than a normal 401K because you can front load a whole life policy let it compound tax free and use it to take loans out whenever you want for a house or whatever. After a few years the compounding pays the premium on the policy and you don't even have to put any more money in it? Any thoughts?

It's amazing how mysterious life insurance seems to so many people. I would argue it's that way with many other types of insurance as well! Great video!

Hate to be the bearer of bad news, but all these big companies just love to give a positive spin on a morbid subject. It's death insurance, not life insurance. Face reality, if you live, there's no payout folks. You're insuring your loved ones if you die – thus death insurance. Not a very marketable term, but more accurate.

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