How much does a $250,000 life insurance policy cost?

 

How much does a $250,000 life insurance policy cost?

Key points

A $250,000 life insurance policy with a 10-year term costs an average of $105 per year for a healthy 30-year-old.

Buying life insurance at a younger age can reduce how much you pay for a $250,000 policy.

Shopping around is key to finding the best life insurance companies.

A $250,000 life insurance policy could provide your loved ones with money to cover final expenses, debts or day-to-day expenses. Whether that’s enough coverage will depend on the details of your financial situation.

The most obvious benefit of purchasing a $250,000 policy is that it will cost less than a larger amount of coverage, such as a $1 million life insurance policy, said Sahang-Hee Hahn, head of strategy and planning at Haven Life. That could make it a budget-friendly option if you’re looking for affordable coverage.

Comparing the monthly cost of life insurance of $250,000 in life insurance with a term life insurance, whole life insurance or universal life policy can help you narrow down which one might best fit your needs.

Explore life insurance: $1 million life insurance policy costs

USA TODAY Blueprint may earn a commission from this advertiser. How much does a $250,000 life insurance policy cost?

A $250,000 term life insurance policy with a 10-year term costs an average of $9 a month, or $108 a year, according to our analysis of term life insurance rates for a 30-year-old nonsmoker in good health.

For a 20-year term, a $250,000 policy costs an average of $11 a month, or $132 a year.

Term life insurance locks in your rates for a level term period, such as 10, 20 or 30 years. You may be able to renew your policy before the term ends, but will likely see increased rates each year you renew.

Average cost for a $250,000 term life insurance policy, by age and gender

The average cost of a $250,000 life insurance policy depends on several factors, including your age, gender and health history. Insurers also look at your profession, risky hobbies and your smoking history to determine the cost of your premium.

If you’re buying term life insurance, the term length of your policy will also affect how much you pay for term life insurance.

Monthly cost for $250,000 10-year term life insurance policy Monthly cost for $250,000 20-year term life insurance policy Monthly cost for $250,000 30-year term life insurance policy How much does a $250,000 whole life insurance policy cost?

The cost of a $250,000 whole life insurance policy is around $203 a month, or $2,436 a year, based on our analysis of whole life insurance quotes for a 30-year-old nonsmoker in good health.

Whole life insurance is permanent life insurance that provides lifelong coverage, as long as you make your payments on time. Your rates and death benefit are set at a fixed amount for the duration of your policy. When you die, your beneficiaries receive a guaranteed death benefit.

In most instances, whole life insurance policies include a cash value component that accrues over time at a fixed rate and is usually tax-deferred, which you can withdraw or borrow from while alive.

Like term life insurance, when calculating your whole life rates insurers will factor in your health history, age, gender, nicotine usage and more.

Average monthly cost for a $250,000 whole life insurance policy How much does a $250,000 universal life insurance policy cost?

A $250,000 universal life insurance policy costs about $100 a month, or $1,200 a year, based on our analysis of universal life insurance quotes for a 30-year-old nonsmoker in good health.

Like whole life, universal life is a type of permanent life insurance. There are several types of universal life insurance, some of which allow you to adjust your premium payments and death benefit amount, which can make it a more flexible life insurance option. However, the cash value component of universal life insurance is usually tied to a money market rate of interest, which can make it a riskier choice.

Average monthly cost for a $250,000 universal life insurance policy

Explore your life insurance options: Universal life insurance

When should you buy a $250,000 life insurance policy? 

You may consider buying a $250,000 term life insurance policy if you need coverage for a set period, such as the number of years you have left on your mortgage.

For example, say you purchased a house with your spouse and you have $250,000 left on the mortgage, with 10 years left in the mortgage term. You might buy a $250,000 10-year term life insurance policy so your spouse would have the cash to pay the remaining balance off should you pass away suddenly.

Likewise, $250,000 in life insurance may be sufficient for your needs if you have savings, investments or other assets that can help meet your loved ones’ needs if something happens to you. That might include savings accounts, CD accounts, a 401(k) plan at work or an individual retirement account.

Age and marital status can also influence your decision about how much life insurance coverage to buy.

Kara Sherman, a certified financial planner and Ameriprise Financial vice president of retirement and protection strategies, said that smaller policies are more common for people who are young and newer to the workforce or single with no dependents.

“Starting a policy earlier in life can help lock in your insurability while you accumulate more assets,” said Sherman. Single people, meanwhile, may use life insurance to leave money behind so their family can cover any lingering debts or final expenses.

Whether that coverage is enough for the long term can depend on what kind of life changes you experience.

“As life evolves, your life insurance needs may change too,” Sherman said, citing marriage, divorce and the birth of children as good reasons to reevaluate your coverage to make sure it’s sufficient.

Here are a few rules of thumb to keep in mind if you’re considering getting a $250,000 life insurance policy:

It’s better to buy when you’re young. The younger and healthier you are when buying life insurance, the cheaper your life insurance premiums are likely to be.

Term life is the most budget-friendly. Compared to whole or universal life insurance, term life insurance policies tend to have lower premiums. While they don’t accrue cash value, term life can put less strain on your budget.

Premiums may be higher for no exam life insurance policies. It may be possible to get $250,000 in term life insurance without a medical exam. However, you might pay a slightly higher premium to skip the health screening.

Longer terms mean higher premiums. The longer you need a term life insurance policy to remain in place, the more you’ll pay in premiums. Insurance companies charge higher premiums to offset the greater likelihood of them eventually having to pay out a claim.

If you’re specifically interested in term life coverage, consider how long you’ll need that policy to stay in place.

“There are many factors to consider when determining your term length, “ Hahn said, “but one important question to ask is ‘what is my longest obligation?'” Life insurance coverage should be sufficient to ensure financial support of that obligation.

It’s also helpful to think about what type of riders you might add on to enhance your policy’s value.

For example, an accelerated death benefit rider could allow you to draw down the death benefit to cover expenses if you’re dealing with a terminal illness. You may also be able to add on riders to cover your children or replace lost income if you become disabled.

Keep in mind that including optional riders may increase your policy premiums. And accessing benefits while you’re still living can reduce the death benefit that’s paid out to your beneficiaries once you pass away.

Is a $250,000 life insurance policy the best for you? 

When deciding how much life insurance you need, it helps to start with your annual income and what your loved ones might need.

“Typically we see customers purchase five to seven times their annual salary in coverage,” said Hahn. “For example, someone making $50,000 per year may find that a $250,000 policy is the right option for them.”

That’s not a hard and fast rule, however. Whether a $250,000 life insurance policy is suitable for you can depend on more than just income.

“Household contributions aren’t limited to take-home pay,” said Sherman.

In a situation where one parent works and the other stays home, for instance, life insurance can be essential for both parties.

If the parent who’s the primary caregiver and housekeeper passes away, the surviving parent may need to pay for childcare services, laundry services or a cleaning person so that they’re able to continue working. All of those costs can easily add up, potentially prompting the need for a larger policy.

Here are a few helpful questions to ask when weighing how much life insurance is necessary:

How many years’ worth of salary would your life insurance beneficiary need to be able to replace?

What expenses would life insurance need to cover at a minimum?

Are there any expenses outside of basic costs of living that life insurance would need to pay for, such as college for kids or retirement for a surviving spouse or partner?

What other assets do you have to supplement a life insurance policy?

Are there any outstanding debts that would need to be repaid, such as a mortgage?

Looking at the bigger picture can help you determine whether $250,000 is enough coverage. Once you know how much life insurance you need, you can take the next step and compare quotes to find affordable policies.

“There is no one-size-fits-all answer to life insurance,” said Hahn.

Methodology

We analyzed term life insurance rates provided by AccuQuote, a national online life insurance agency that works only with top carriers and whole and universal life insurance rates from LifeQuotes, a national life insurance comparison site that works with 50 leading life insurance companies.

Term, whole and universal life insurance rates are for nonsmokers of average height and weight who are in excellent health. Your rates will vary based on your age, gender, health and other factors.

Frequently asked questions (FAQs)

What is the average monthly cost of a $250,000 life insurance policy?

According to our analysis of rates, here are average premiums for a $250,000 life insurance policy for a 30-year-old nonsmoker in good health.

10-year term life policy: $9 per month

Whole life policy: $203 per month.

Universal life policy: $100 per month.

The type of life insurance policy term length (if applicable), as well as your age and gender, will affect the cost of your life insurance premiums.

Does gender affect your life insurance rates?

Life insurance companies often consider gender as a factor when determining life insurance rates. Women tend to pay less for life insurance than men, which is largely due to their overall health outlook and life expectancy. Compared to your medical history and lifestyle, however, gender may have less of an impact on what you pay for coverage.

What is the cash value of a $250,000 life insurance policy?

Whether a $250,000 policy builds cash value will depend on what type of life insurance policy you have.

Permanent life insurance policies commonly include a cash value account, where your cash value will grow tax-free, and you can borrow against or withdraw from it while you’re alive. The amount of cash value you’re able to accumulate, and how quickly, will depend on the type of cash value insurance you choose.

Term life insurance policies do not have a cash value component.