Money Management

The number may surprise you. 

If you don’t already have a life insurance policy in place, then signing up for one is a move you should definitely aim to tackle sooner rather than later. Without life insurance, you might leave your loved ones in a position where they struggle financially in the absence of your income.

But you don’t just want to buy life insurance. You also want to make sure you have adequate coverage.

Now, that can mean different things to different people. A good rule of thumb is to buy enough life insurance to replace 10 times your income and have enough money left over to pay off outstanding debts your loved ones would be responsible for in your absence.

So, let’s say you earn $80,000 a year and owe $200,000 on a mortgage you hold jointly with your spouse. In that case, a $1 million life insurance policy is probably a good bet for you.

But will a $1 million life insurance policy break the bank? Not necessarily. In fact, you may be surprised at how affordable it is.

What will life insurance cost you?

The amount of money a $1 million life insurance policy costs you will depend on a few different factors. These include your age, health, and the type of policy you buy.

As a general rule, the younger and healthier you are when you apply for life insurance, the more likely you’ll be to snag an affordable rate on your premiums. For example, Forbes reports that the average yearly cost for a 30-year, $1 million life insurance policy is $780 for a male who applies at age 30. For a man who applies at age 35, that cost rises to $888. And at 40, it increases to $1,284.

But even if you’re fairly young, if you have known health issues, those could drive your premium costs up, because the company that insures you will think it’s taking a bigger risk. If you’re able to address a health issue that might otherwise be a red flag, like obesity, you may be rewarded with lower premiums.

The type of policy you buy will also have an impact on cost. If you purchase a term life insurance policy, your coverage will run out at some point in time and won’t accumulate a cash value. However, you’re likely to snag a lower rate than you will with whole life insurance.

Whole life insurance is permanent coverage — you’ll be insured until the day you die. And, whole life insurance can accumulate a cash value, which you can take out or borrow against. But the cost of whole life insurance tends to be prohibitively expensive. So while whole life insurance has its benefits, you may find that you just can’t swing it financially.

Do your research

There’s one other factor that could dictate what you pay for life insurance — the insurance company you use. So if you’re ready to get life insurance, shop around for quotes. You may find that one insurer is able to offer a lower rate than another, all the while giving you the same amount of coverage.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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You should read this if you have a mortgage or are thinking about getting one. 

When you get a home loan, chances are good a 30-year mortgage will be one option you consider. As the name suggests, these loans are paid off over a period of 30 years as opposed to loans with a shorter term such as a 15-year mortgage.

If you’re trying to decide which home loan is the best choice, be sure to consider these three little-known perks of 30-year loans.

1. Payments get cheaper due to inflation

If you get a 30-year fixed-rate mortgage, payments actually end up effectively getting cheaper over time. That’s because your payment stays the same for three whole decades, even as your money’s buying power declines because of inflation.

Say you got a home loan in 2022 with a $1,000 monthly payment. In 2052, you’ll still be paying $1,000. But, assuming a 2.5% average annual rate of inflation, the $1,000 you’re sending to your mortgage lender decades from now wouldn’t buy you $1,000 worth of goods and services in the future. Your $1,000 30 years from now would be worth around the equivalent of what $477 would be worth now.

Because inflation is constantly reducing the value of each dollar just a little bit, your mortgage gets cheaper in real terms every single month. And a longer mortgage loan means you’re getting more of a future discount than a loan with a shorter term would offer since inflation has more time to reduce the value of the money you’re using to make your payments.

2. You’ll have more flexibility in your monthly budget

When you have a 30-year loan, you can pay it off in less time if you want to. If you’ve got some extra money and want to use it to pay your mortgage balance down faster, you can. But you can also do plenty of other things with it as well, such as investing for retirement.

Since a 30-year loan has lower required monthly payments than loans with shorter repayment times would, you benefit from having more money in your pocket to use as you wish. This option is taken away from you if you commit to a loan that has a shorter payoff time but higher monthly payments.

Having flexibility is important as your financial goals (or income) may change over time.

3. You may be eligible to deduct mortgage interest if you itemize

Finally, if you itemize when you file your taxes rather than claiming the standard deduction, mortgage interest is tax deductible on loans up to $750,000. The ability to take a deduction for the interest you are paying enables you to get a government subsidy to help you afford your house.

If you have a mortgage loan for 30 years, you can get this tax deduction the entire time (unless Congress were to change the rules). With the government allowing you to pay interest with pre-tax dollars, your loan costs you much less than it otherwise would.

For each of these three reasons, you may want to opt for a 30-year loan if you are purchasing a home and comparing the mortgage options available to you. You can enjoy all of the benefits your loan offers for many years after moving into a home.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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