Life insurance is a contract where a company pays a death benefit to beneficiaries after the policyholder dies. A large majority of people overestimate the cost of life insurance, and nearly half of Americans are underinsured or believe they need more coverage. The cost of a policy is influenced by age, health, and lifestyle, and factors like pre-existing conditions generally do not prevent someone from obtaining a policy.  

Key Facts

• Coverage gap: Over 40% of American adults report needing more life insurance, and many worry their families would struggle to cover expenses if they died. 

• Cost perception: A significant number of people (over 50%) think life insurance is much more expensive than it is. A healthy 30-year-old can expect to pay around $160 a year for term life insurance, but many estimate it costs significantly more. 

• Factors influencing cost: Your premium is determined by factors such as your age, health, and lifestyle. Younger and healthier individuals typically pay lower rates. Rates can increase significantly with age, so getting a policy when you are younger can be more affordable. 

• Policy types: There are different types of life insurance, with term life insurance being the most common and affordable option for a specific period. Permanent life insurance, such as whole life, offers lifelong coverage and can include a cash value component, but it is more expensive. 

• Employer-provided coverage: While many people have life insurance through their employer, the median payout (often one year's salary) may not be enough for dual-income households. 

• Medical exams: Many companies now offer policies without a medical exam, though this typically results in higher premiums. 

• Policy changes: You can make changes to your policy after it's purchased to adjust coverage as your needs change over time.