How long you live, and what a policy really costs

Every conversation about lifetime cost eventually reaches for a life expectancy figure. So here are the real ones, and then the reason they're less useful than they look.

For 2023, life expectancy at birth in the United States was 78.4 years — 75.8 for men and 81.1 for women, according to the Centers for Disease Control and Prevention. The Social Security Administration's period life table for the same year gives 75.79 for men and 81.06 for women.

Now the part that changes the picture. Those are figures measured from birth, and they include everyone who died young. If you have already reached 65, the arithmetic that applies to you is different: at 65, average remaining life expectancy in 2023 was 19.5 more years — 18.2 for men and 20.7 for women. That puts the average age at death for a 65-year-old well past 84, not at 78.

Two warnings about all of these numbers.

An average is the midpoint of millions of outcomes, not a forecast. Roughly half of people live longer than it. Planning as though the average is your date is planning to be wrong half the time.

Second, these are population figures. They aren't adjusted for your health, your family history, whether you smoke, or what you do for a living. An insurer will assess those things about you when it prices your policy, and it will reach a different conclusion than the national table does.

Level term gives you a fixed premium for a fixed number of years. Within that window it is the lowest-outlay way to hold a large death benefit, which is why it fits people with a temporary need and a real budget.

Then the term ends, and one of three things happens.

• The coverage simply stops. This is the common outcome, and it's worth stating without embarrassment: most term policies never pay a death benefit. That isn't a failure of the product. You bought protection for a period, the period passed, and you didn't need it. That is the same deal you make with your home insurance every year.
• You renew. The premium is recalculated at your new age, and it climbs from there. The Insurance Information Institute puts it plainly: term can go up substantially every time you renew it. Renewal also isn't available forever, and the age limits vary by company and policy.
• You convert. If your policy allows it and the window is still open, you exchange it for permanent coverage without proving your health, at a much higher outlay. We cover how that works on rules and riders.

So a long life does something specific to term: it moves you past the period you paid for, and leaves you buying coverage again at an age when it costs considerably more, if you can get it at all.

Permanent coverage is built to last, at a higher but level premium. Held to the end and kept adequately funded, it pays. The Insurance Information Institute describes the appeal directly: it pays a death benefit whether you die tomorrow or live to be a hundred.

That flips the probability. With term, the likely outcome is no payout. With permanent held to the end, the payout is the plan. Which means "cost" means something different in each case — for term you're buying a period of protection, and for permanent you're pre-paying an eventual payment.

A long life does two things here. It means more years of premiums for the same death benefit, which lowers the effective return on the money you put in. And it means the guarantee runs a very long time before it delivers.

You'll meet a claim that permanent insurance costs less than term over a long enough life. The reasoning is that term renewals eventually rise past a level permanent premium, and that permanent actually pays out while term usually doesn't.

That reasoning holds only under specific conditions: you hold the permanent policy for life, you never let it lapse, and you count the eventual payout as part of the return.

The opposite case is equally real. If your need was genuinely temporary — the mortgage years, the children at home — then term for that period, with the difference in premium invested, can leave you better off. That approach depends on conditions of its own: that you actually invest the difference rather than spend it, that you keep investing through the bad years, and that your need really does end when the term does.

Neither is a rule. Both are conditional, and the conditions are about you.

Five levers, each one a question to put to whoever is showing you an illustration.

1. Time value of money

A dollar today is worth more than a dollar in forty years, because today's dollar can be invested. A permanent policy's payout often sits thirty to fifty years away, so comparing it against premiums paid now, dollar for dollar, overstates it. A fair comparison discounts the future payout back to today's terms. Ask what discount rate an illustration assumes.

2. Opportunity cost of the difference

The extra premium a permanent policy requires is money you didn't invest somewhere else. The whole buy-term-and-invest-the-difference case rests on this, and the comparison turns entirely on the rate of return you assume. A higher assumed return favors investing; a lower one favors the policy. Anyone who shows you this comparison without naming the assumed return is showing you a conclusion, not an analysis.

3. How long the coverage is actually needed

This is the question that decides most cases, and it isn't a financial question at all. If the need genuinely ends when the mortgage is paid and the children are grown, a temporary product matches a temporary need. If someone will depend on you for as long as you're alive — a child with a disability, a spouse whose pension ends at your death, a business that can't replace you — the need doesn't end, and buying a product that does creates a problem later.

4. Lapse

This is the one that decides real outcomes. Every argument for permanent insurance assumes you keep paying. Stop, and you've paid the higher premiums for years and collected nothing like what was projected. A policy you can comfortably sustain through a bad decade beats a better-designed policy you abandon in year twelve. Be honest with yourself about the number, not optimistic.

5. Return on the death benefit

One more way to look at it. Treat the premiums as money in and the death benefit as money out, and you can calculate what the policy effectively earned. Die early and that return is enormous. Live a long time and it falls steadily, because you paid many more premiums for the same benefit. It's a useful reframing: the policy's "return" is a function of how long you live, which is the one input nobody controls.