Life insurance premiums typically increase as you age, so if you’re thinking about applying for coverage, starting this process earlier may be beneficial in reducing cost. Getting life insurance quotes can be a great way to determine how much you would pay for an insurance policy. Your individual preferences should be top of mind to find the right life insurance policy for your needs and budget. Not all life insurance companies offer the same types of policies, so knowing what type of life insurance you need and your budget in advance may help narrow your search.

What is life insurance?

Life insurance is essentially an agreement between you (the insured) and a life insurance company. You pay a 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. The face amount, also called a death benefit, is the amount payable to the beneficiary or beneficiaries at the time of the loss. 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.

How much does life insurance cost?

The cost of a life insurance policy depends on multiple factors, such as your age, health, lifestyle choices, the amount of coverage you need to meet your financial goals and the policy type you choose.

Life insurance cost is also determined by your life expectancy and overall risk profile. The longer your life expectancy and the fewer risky behaviors you take part in, the less you are likely to pay for life insurance. However, health conditions that reduce life expectancy or risky lifestyle habits (smoking or skydiving, for example), may cause life insurance costs to increase.

Additionally, whole life insurance policies will typically result in a higher premium than term life insurance policies. This is because whole life provides coverage for the duration of your lifetime and assumes a payout is inevitable, while term life only provides coverage for a set number of years, meaning you could outlive the policy and no death benefit will be paid out by the insurer. As with any insurance, the greater the likelihood of a claim payout, the more a company may charge to offset that probability.

Types of life insurance

There are multiple types of life insurance policies to choose from, based on your financial situation and what financial protection you are trying to accomplish. Because not all insurers offer each policy type, it may be helpful to understand what each policy has to offer before obtaining a quote.

Term life insurance

Term life insurance is a popular option for life insurance coverage and is generally the least complex in its function and features. This type of life insurance policy exclusively provides coverage in the form of a death benefit and has no cash value buildup for the length of the policy term. For this reason, it is usually the cheapest form of life insurance available. But coverage only lasts for the term that is specified in the policy. Once the term ends, the coverage expires. Term life insurance may be popular with younger families with small children who may depend upon a single or primary financial contributor. The financial protection needed may be greatest, and a large amount of coverage can usually be bought at a reasonable price (assuming that the insured is in good health).

Learn more: Best term life insurance companies

Whole life insurance

Whole life insurance is permanent life insurance that builds cash value over time. Whole life insurance policies are designed to remain in force until the death of the insured and have a savings component built into it, which is the cash value account. Part of your premiums is put into this savings account, which will grow at a guaranteed rate on a tax-deferred basis. You can access this cash value via a policy loan or withdrawal, but accessing these funds can affect the payment amount your beneficiaries receive in the future. Whole life is generally the most expensive policy you can buy because of its guaranteed financial benefits.

Learn more: Best whole life insurance companies

Universal life insurance

Universal life insurance is a form of permanent life insurance with cash value and flexible premiums, and the death benefit can also be flexible in many cases. Universal life policies accumulate interest on the cash value of the policy, and the rate of that interest will fluctuate in tandem with prevailing interest rates.

Variable life insurance

Variable life insurance is a type of policy where 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 if 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 another type of policy. Because these policies have the greatest risk, you may want to consult with a financial advisor to understand if this type of coverage is right for you.

Final expense life insurance

Final expense life insurance is a specific type of permanent life insurance policy that is designed exclusively to pay for end of life expenses like funeral and burial expenses or small debts. Many of these policies do not require medical underwriting, but coverage can be expensive in some cases.

What type of life insurance policy is right for me?

Before 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 upon death. But some needs could be longer-term, like growing wealth or paying for funeral costs. Also, using a life insurance calculator may help you determine how much coverage is right for you.

If you have temporary and permanent needs for life insurance, purchasing a term policy that has the option to convert to a permanent policy later may be an approach to consider. Alternatively, you may prefer to purchase both a term and a permanent policy with different coverage amounts.

For example, let’s say it totals $1 million to pay off all your debts and replace your income so your family can stay in the home and pay for childcare. However, your only long-term financial concern is to cover funeral costs amounting to $30,000. Getting a quote for $1 million in term and $30,000 in permanent life insurance 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 which approach(es) may be best for you.

What do I need to get a quote?

Now that you know about the main types of life insurance available, you may be ready to apply that knowledge to your situation and finances. You will generally need to determine how much coverage you need (or want), take an assessment of the state of your health and review your budget to see how much life insurance you can afford. Here is a list of suggestions to have available for when you start shopping for a specific policy:

  • Tobacco use: If you smoke or use chewing tobacco, buying life insurance may cost more than for a non-smoker. Some life insurance companies are lenient with tobacco users, but the policies may still be more expensive compared to a non-smoker.
  • Health conditions: If you have any major health conditions, it could add to the cost of your policy. Pre-existing conditions, such as cancer, heart disease, lupus, diabetes, lung disease and liver cirrhosis may result in more costly premiums.
  • Prescriptions: A major health condition may not affect eligibility or premiums as significantly if the condition is being managed. Have a complete list of your medications for reference, including over-the-counter drugs. The insurance company will most likely need to know dosage amounts, how the medication is taken (once a day, twice a day, in the morning or evening, etc.) and how long you have been taking it.
  • Medical history: Many insurers want to know whether your immediate family members have lived long and healthy lives or had serious health complications resulting in a shortened lifespan. Insurers may want to know whether your family has a history of heart disease, high cholesterol or major health ailments passed down through the generations. This information can help them estimate your longevity.
  • Budget limitations: Your budget may ultimately determine how much life insurance coverage you can qualify for or afford. Paying premiums once a year may help you avoid installment fees, but not everyone will have the financial means to pay an annual premium in full. Discussing your payment options with the agent during the quote process may help you decide what works best for your situation.

How to compare life insurance quotes

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 and/or nicotine products? You may want to compare premiums 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 insurance providers 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(s) you need, you may want to compare each based on customer satisfaction and financial strength ratings from third-party agencies, such as J.D. Power and AM Best.

Organize your information

It might be helpful to create a spreadsheet or list containing the names of the insurance companies, the names of the policies that you discussed and the key features that the policies contain. 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. This could 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 give you the best value. An indexed universal life policy with an accelerated benefit rider may 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 or advice on what will work best for you.

Learn more: How to buy life insurance

How to save money on life insurance quotes

If you are not happy or comfortable with how much the policy you want or need will cost, there are things that you might be able to do to save. Here is a list of steps you can take to possibly earn a lower premium:

  • Quit using tobacco: Many life insurers offer cheaper rates to non-smokers than smokers. If you have a year or more of non-smoking history, you may be able to get better life insurance quotes.
  • Maintain a healthy weight: A primary risk factor life insurers use to determine premiums is your health index, which accounts for weight. Those who fall in the overweight or obese range may pay more for life insurance, as it may be associated with shortened life expectancy and increased mortality risk. By staying in a better weight range, you may find quotes for life insurance are more affordable.
  • Manage health conditions: If you have health conditions requiring medications, take them as prescribed. This may demonstrate to the life insurance company that you are actively working to manage your health condition based on your doctor’s treatment plan.
  • Consider policy types: Term life insurance typically costs a fraction of what permanent policies cost, as the coverage spans a shorter time and a death benefit is not guaranteed. Just remember that this coverage is temporary. For some, this may be ideal, as life insurance needs may diminish with age and wealth accumulation.
  • Consider buying life insurance sooner: The older you are, the more life insurance will cost. Some term policies may offer the option to convert to a permanent policy later without re-qualifying for coverage.

Learn more: Cheapest life insurance companies

Frequently asked questions

How much life insurance do I need?

While everyone’s needs vary, calculating your income over the number of years you need coverage, plus any debts to be covered, may give you an approximate idea of how much life insurance you should buy. An insurance agent can help you determine your needs and provide quote options for life insurance coverage.

Is term life or whole life insurance better for me?

If you’re deciding between term and permanent life insurance, consider what you want your life insurance to do for you. Term life insurance offers coverage for a set time, usually when your beneficiary(ies) financial needs are the greatest. However, long-term planners may find the appeal of a permanent policy more suitable to their financial goals, as whole life policies offer additional wealth accumulation components. A financial planner or life insurance agent will be able to make a formal recommendation based on your goals and current financial situation.

What is the best life insurance company?

The best life insurance company depends on your financial needs, personal situation and preferences. Aside from identifying companies that offer the policy type(s) you need, you may also want to research customer satisfaction and financial strength scores to make sure you’re choosing one of the best life insurance companies available.