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Life insurance is more than just a policy; it's a promise to protect your loved ones' financial future. The cornerstone of that promise is selecting a policy that genuinely mirrors your unique needs and goals. The journey begins with understanding and comparing life insurance quotes. Bankrate’s insurance editorial team can help you understand what a life insurance quote is and how to compare them so you can find a policy tailored for you. Our guidance ensures that you not only understand the nuances but are also empowered to find the best solution tailored to your circumstances.
What is life insurance?
Life insurance is an agreement between you (the insured) and a life insurance company. You pay a life insurance premium in exchange for a coverage amount provided to your beneficiaries by the insurer if you die during the coverage period. Your beneficiary — the person or persons you designate to receive the funds — will receive the face amount of the life insurance policy upon your death (assuming the policy is still active). The face amount, also called a death benefit, is the amount payable to the beneficiary or beneficiaries at the time of your passing. Depending on the type of policy you have, coverage will either be guaranteed for your lifetime or expire at the end of your chosen policy term.
Learn more: Guide to life insurance
How to compare life insurance quotes
If you’re in the process of getting life insurance quotes online, by phone or in an agency, you may be wondering how you can compare the options to find the right fit for you. Here are some strategies you can use to compare life insurance quotes to help ensure that you find a provider and policy that works for your needs.
- Assess your needs: Your life insurance needs depend on your circumstances. Do you only want coverage until your children graduate from college? If so, a term life insurance policy might be right for you. Are you dealing with serious or long-term health concerns? You may want to look into companies that offer no-medical-exam policies. Do you use tobacco or nicotine products? You may want to compare rates from companies that offer life insurance for smokers to find a more affordable price. An insurance agent can help you pin down any specific needs that you might have and recommend a policy type.
- Research multiple life insurance providers: After determining your specific financial and coverage needs, you’ll need to find life insurance companies that offer the policies you want. An insurance agent can help you learn more about a company if you’re having trouble locating the information you need on the insurer’s website. Once you have a list of life insurance companies that offer the policy type you need, you may want to compare each provider based on customer satisfaction and financial strength ratings from third-party agencies, such as J.D. Power and AM Best.
- Organize your information: You may find it helpful to create a spreadsheet or list containing the names of the insurance companies, the types of policies that you discussed and the key features of each option. Take note of the different riders or perks that policies may offer. For example, a policy may have an option to include an accelerated benefit rider that allows you to access a portion of the death benefit while you’re still living to pay for medical or long-term care expenses. Keep in mind that adding riders will typically increase the cost of the policy.
- Compare your choices: Once you have all of this information organized, you can conduct a side-by-side comparison to see which policies give you the best value. A life insurance quote will tell you the type of policy it is, the amount of the death benefit or other coverage limits, as well as any riders that can be added to the policy. Your financial advisor can also look over this information and give you some insight or advice on what may work best for you.
Learn more: How to buy life insurance
Who needs life insurance?
Life insurance can be a useful purchase for a lot of people. If anyone depends on your income, if you want to help ensure your loved ones can pay your end-of-life expenses or if you want to leave a financial gift to a person or organization, life insurance could be a good idea. Here are some groups of people who may be especially interested in a policy:
- Families: Your family may include just you and a significant other, or there may be kids in the mix, but either way, life insurance could help ensure that your loved ones’ quality of life can remain the same if your income is lost due to death.
- New parents: While having a life insurance policy as a parent can be an important consideration, new parents may also want to consider buying a policy for their child. Buying life insurance for a child can help ensure their insurability in the future, should they develop health issues.
- Anyone with dependents: Maybe you don’t have children, but there are other people in your life who rely on your income. You may have a friend or family member who depends on you for financial support, for example, and a life insurance policy could help give you peace of mind that they’ll be financially taken care of if you pass away.
- Single people: If you’re single, you may think you don’t have a need for life insurance. But depending on your financial situation, a lack of a policy could mean your loved ones are stuck with out-of-pocket expenses for your end-of-life costs. Life insurance could help ease the stress of your loss on those closest to you.
- Business owners: If you own your own business, you may want to talk to your financial advisor about life insurance. A policy could help protect your partners should you pass away. The funds could be used to buy your share of the business or hire additional staff to fill your role.
- Seniors: You may feel like your need for life insurance wanes as you get older and have more money in the bank. While you may not need to replace your income for a spouse or dependent, you might want to consider life insurance to leave a financial gift to a loved one or an organization close to your heart.
Types of life insurance policies
While there are multiple types of life insurance policies, they all fall under two broad categories: term life and permanent life. The kind of policy that you choose will be based on your financial situation and your goals. Because not all insurers offer each policy type, it may be helpful to understand what each policy has to offer before obtaining a quote.
What type of life insurance policy is right for you?
You should consider what type of financial need you want the policy to cover before shopping for the best life insurance policy. Some needs may be temporary, such as paying outstanding debts like student loans or a mortgage. But some needs could be longer-term, like growing wealth or paying for funeral costs.
If you have both temporary and permanent needs for life insurance, you might consider purchasing a term policy that has the option to convert to a permanent policy later. Alternatively, you may prefer to purchase both a term policy and a permanent policy with different coverage amounts.
For example, let’s say you need $300,000 in coverage to help your spouse pay off your mortgage if you pass away. However, you still want coverage for your funeral costs even after the mortgage is paid. Getting a quote for a $300,000 term policy to cover your mortgage commitment and a smaller amount in permanent life insurance for your end-of-life expenses may be better than choosing just one policy. If you have money saved or prepaid for your funeral, term life insurance may be all you need. Discuss your situation with a financial planner or life insurance agent to learn what approach may be best for you.
What lifestyle factors affect my life insurance quotes?
Life insurance quotes take multiple aspects of your life into account to determine your rate. For example, age is one of the biggest life insurance rating factors and may also limit you on the type of coverage you can buy. Life insurance for seniors is generally more expensive, since it’s more likely that an older insured will pass away early in the policy period. While you can’t do anything about how old you are, there are other lifestyle factors that affect your life insurance policy quotes and rates:
How to buy a life insurance policy
If you’ve found a company and policy type that fits your needs, it’s time to apply and purchase a policy. Applying for life insurance isn’t difficult, but you will need some information available to fill out the application. Here are some steps you can follow to make the process as easy as possible:
- Decide on your policy details: If you’re ready to buy life insurance, you’ve probably already figured out what type of policy best fits your needs and the coverage amount that is right for you. If you haven’t, take time to do that now.
- Gather your information: Purchasing life insurance usually involves filling out an application, so you’ll want to have your personal and health information easily accessible. This includes your date of birth, height and weight, information about medications you take and health conditions you live with, and information about your family’s medical history.
- Contact your preferred company and fill out an application: You can often get quotes online, or you can work with a company by phone or in a local agency. Some companies even offer applications by mail and you may even have life insurance options through your employer. Once you know how your preferred life insurance company operates, you can fill out an application.
- Follow the underwriting steps: Each company has its own underwriting process and steps, so from this point on you’ll need to follow the instructions given to you by your company or agent. This could include contacting a medical exam company or scheduling a doctor’s appointment for an exam, answering additional health questions or simply waiting to hear back from your carrier about your application, depending on the type of policy you’ve chosen. Not all life insurance policies have a medical exam, and some can require a medical exam before you can purchase the policy.
- Pay for the policy and choose your beneficiary: Once approved for the policy, you must make a payment to secure coverage. Depending on the provider, it can take days or weeks for coverage to go into effect. You must also select a beneficiary to receive payment upon your death. This is usually a spouse, adult child or close relative, but it doesn't have to be. The beneficiary can also be a charity, a trust or your estate, though your state or life insurance company may have restrictions. If you are considering an unusual beneficiary selection, check with your provider for conditions. Also, most life insurance specialists recommend selecting a backup beneficiary in case your original selection died before you, as well as setting up a trust or custodial account if you need to leave money to your minor children.
If you’re unsure how to apply for life insurance or what exact steps you need to follow, it’s best to ask your agent or life insurance company for clarification, since the process can vary between companies and policy types.
Learn more: How to buy life insurance
How much life insurance do I need?
If you've found yourself asking, "How much life insurance do I need?" at the start of your shopping journey, you're in good company. The amount of coverage you need will vary based on several circumstances, such as:
- Age of spouse and/or children
- Likely future financial needs of spouse and/or children
- Current amount of debt including mortgage and car loans
- Burial and funeral expenses
One way to decide how much coverage to buy is to use a life insurance calculator. If you're still unsure how much coverage to buy, work closely with your life insurance agent and financial advisor for guidance.