Comparing life insurance quotes

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Purchasing life insurance can be a daunting and sometimes overwhelming task with the amount of choices available, especially if you are unsure how much coverage you need and what policy is the best choice. However, if you do a bit of prep work before shopping for life insurance quotes, the process may be faster and easier.

Life insurance needs are unique to each family’s lifestyle and financial situation. Much like with purchasing home and auto insurance, you want to consider your needs, what you want to protect and figure out what coverage is best for you. Learn more about what life insurance is, the types of coverage available, how much it costs and what you need to get life insurance quotes. When comparing available options, consider ways to save on life insurance and what scenarios make buying more than one policy a good choice.

What is life insurance?

In a nutshell, life insurance is simply a legal contract between you and a life insurance company. The contract says that you will pay a certain amount of money (known as “premiums”) on a periodic basis, such as monthly or annually, and the insurance company will pay your beneficiaries a specified sum of money when you die. This payment is known as the death benefit of the policy.

How much does life insurance cost?

The cost of a life insurance policy will depend upon several different factors, such as your age, gender, health, use of tobacco products, tendency to engage in dangerous activities (such as skydiving) and the amount of coverage that you need.

Those with serious health conditions can expect to pay more for their life insurance, as can men. The reason for this is that life insurance companies, during the underwriting process, try to determine how long you will live so that they know how much time they have before they have to pay out your death benefit. The longer they can wait, the better risk they consider you to be.

Additionally, those searching for whole life insurance will pay a higher premium than those searching for term life insurance. This is because with whole life, you are guaranteed a payout, while with term life it’s entirely possible that you will outlive your term and the company won’t have to pay a death benefit at all.

Types of life insurance

There are several types of life insurance. Each type generally has a specific use, and the right type for you will depend upon your situation and what you are trying to accomplish financially.

Term life insurance

This is by far the simplest type of life insurance. Term life insurance provides pure death benefit protection and has no cash value buildup. For this reason, it is usually the cheapest form of insurance available. But coverage only lasts through the term that is specified in the policy. Once the term ends, so does the coverage. Term life insurance is popular with young families that have small children and may be dependent upon a single breadwinner, because a large amount of coverage can be bought at a reasonable price (assuming that the insured is in good health).

Whole life insurance

This is the oldest form of cash value life insurance. Whole life is designed to remain in force until the death of the insured and also has a savings component built into it (the cash value). Part of the premiums that you pay into this type of policy are put into this savings account, where it will grow at a guaranteed rate on a tax-deferred basis. You can access this cash value at any time via a policy loan or withdrawal. Whole life is generally the most expensive type of policy you can buy because of its guarantees.

Universal life insurance

This form of cash value life insurance has flexible premiums and the death benefit can also be flexible in many cases. Universal life policies pay interest on the cash value that accumulates inside the policy, and the rate of interest that you earn will fluctuate in tandem with prevailing interest rates.

Variable universal life insurance

This is the riskiest – and most complex – type of life insurance available today. With this type of policy, the money that goes into the cash value of the policy is invested in a portfolio of mutual fund sub-accounts that invest in stocks, bonds, real estate and commodities. It is possible to lose money in this type of policy when the stock and bond markets perform poorly. It is also possible to get a higher rate of return with this type of policy than with any other type of policy.

Indexed universal life insurance

This type of policy also builds cash value like Universal Life and Variable Universal Life policies do, but there is no market risk involved. Each policy is linked to an underlying financial benchmark index. When the index goes up, the policy earns interest. When the index goes down, the cash value of the policy simply remains at its current level. It cannot decline in value like it can in a Variable Universal Life.

Final expense life insurance

This is a specific type of whole life insurance policy that is designed exclusively to pay for funeral and burial expenses. No medical underwriting is required for this type of policy, but coverage can be very expensive in many cases.

Mortgage protection life insurance

This type of term coverage is designed solely to pay off your mortgage if you die prematurely. As with final expense insurance, there is no medical underwriting required, so the cost for this type of coverage is relatively high.

What type of life insurance policy is right for me?

There are several options to choose from when considering life insurance coverage. Before you begin shopping for life insurance quotes, consider what type of financial need you want the policy to cover. Some needs may be temporary, such as paying outstanding debts like student loans or a mortgage. But some needs could be permanent, like paying for funeral costs.

Using a life insurance needs calculator can help you determine how much coverage is right for you. If you have temporary and permanent needs for life insurance, purchasing a term and permanent life insurance policy may be something to consider.

For example, let’s say to pay off all your debts and replace your income so your family can stay in the home and pay for childcare would total $1 million. However, you only have a permanent need for funeral costs of $30,000. Getting a quote for $1 million in term and $30,000 in permanent life insurance may be a better solution than choosing just one policy. If you have money saved or prepaid for your funeral, term life insurance may be all you need.

What do I need to get a quote?

Now that you know about the main types of life insurances that are available, it is time for you to apply that knowledge to your own situation and finances. You will need to figure out how much coverage you need (or want), take an assessment of the state of your health and look at your budget to see how much life insurance you can afford. Here is a list of the information to have at hand when you start shopping for a specific policy:

  • Use of tobacco – If you smoke or use chewing tobacco, then buying life insurance will cost more than it would if you were a nonsmoker. There are life insurance companies out there that will cater to tobacco users, but their policies will still be more expensive.
  • Health conditions – If you have any kind of major health condition, it could add to the cost of your policy. If you have cancer, heart disease, lupus, diabetes, lung disease, cirrhosis of the liver or any other major health ailment, then you may have to pay more for your coverage than a healthy person your age.
  • Prescription drugs – Many life insurers will not count a major health condition as a strike if the condition is being controlled with medications. Have a complete list of all of your medications, including over-the-counter drugs, available. The insurance company will most likely need to know dosage amounts, how the medication is taken (i.e. once a day, twice a day, in the morning or evening, etc.) and how long you have been taking it.
  • Your family’s medical history – Many insurers also want to know whether your forebears have lived long and healthy lives or had serious health problems and died at relatively young ages. They may want to know whether your family has a history of substance abuse, tobacco use or other major health ailments that have been passed down through the generations. This information can help them to estimate your own longevity.
  • The maximum amount of premium that you can pay each month (or year) – Your budget may ultimately determine the real amount of life insurance that you can qualify for. Paying premiums once a year can lower this cost slightly, but of course that requires you to save up enough during the year to cover this cost with a single payment.

How to compare life insurance quotes

Gather your raw data

Once you have done a few online searches and talked to your financial advisor or life insurance agent, then you can begin whittling down your list of quotes to those that give you the best value. But price alone cannot be the sole overriding determinant here; two policies may cost the same, but one may have more features than the other or be able to underwrite you more kindly than another company will.

Organize your information

It might be a good idea to create a spreadsheet that contains the name of the insurance company, the name of the specific policy that you were shown and the key features that the policy contains. Be sure to make enough rows or columns to accommodate all of the different kinds of riders that policies today can offer. One policy may have accelerated benefit riders that allow you to access a portion of the death benefit while you’re still living to pay for medical or long-term care expenses. This can greatly add to the value of the policy.

Compare your choices

Once you have all of this information organized, you can use a side-by-side comparison to see which policies are giving you the best value. An indexed universal life policy with accelerated benefit riders may well be worth the higher cost when compared to a term policy that doesn’t have these riders. Your financial advisor can also look over this information and give you some insight.

How to save money on life insurance quotes

If you are unpleasantly surprised at how much the type of life insurance that you want or need is going to cost you, there are a few things that you might be able to do to drive down the cost. Here is a list of steps you can take to qualify for a lower premium:

  • Quit using tobacco – Although this may be easier said than done, it is one of the best things you can do to lower your insurance costs. You may have to abstain from tobacco for at least a year before your premiums will come down, but it’s worth it for so many reasons.
  • Lose weight – If you are overweight or obese, going on a diet may reduce the cost of your premiums by a noticeable amount. Overweight people have shorter life expectancies, so losing those extra pounds can pay several types of dividends.
  • Pay annually – Paying your life insurance premiums on an annual basis will usually yield at least a modest discount. If you get a large income tax refund each year, then this could be a good source of funds to cover this expense.
  • Take your meds – If you have health conditions that require medications, be sure to take them as prescribed so that the life insurance company knows that you are actively doing something about your condition.
  • Buy term insurance instead of permanent – Term insurance typically only costs a fraction of what permanent policies charge. Just remember that this coverage is only temporary. But you may also reach a point where you no longer need coverage, and term insurance could be just the ticket if that happens.
  • Buy life insurance when you’re young – The older you get, the more life insurance will cost. Term insurance generally becomes prohibitively expensive after you reach age 50. But a term policy can cost very little for those in their 20s who are in good health.

Frequently asked questions

How much life insurance do I need?

The goal of life insurance is to replace your income should you pass away so your family’s financial needs are covered. While everyone’s needs will vary, calculating your income over the number of years you need coverage plus any debts to be covered should give you an idea of how much life insurance you should buy. An insurance agent can help you determine your need and provide several quote options for life insurance coverage.

Is term life or whole life insurance better for me?

If you are only going to need coverage for a specific period of time, then term insurance may be the way to go. If you are going to need a source of income that you can use to pay estate taxes or cover living expenses during retirement, then a permanent (cash value) policy may be more appropriate.

What is the best life insurance company?

There is no one “best” life insurance company. As mentioned previously, different companies cater to different types of insureds. Some companies specialize in insuring cancer patients, while others cater to those with other ailments. You can go here for a list of good insurers that offer broad-based coverage.

Written by
Mark Cussen
Contributing writer
Mark Cussen writes about a range of topics related to insurance.
Edited by
Insurance Editor