Life insurance can be seen as complicated, morbid and boring. And many people incorrectly think it’s too expensive for them, but life coverage can serve as a vital safety net for your family if the unthinkable happens.
Having life insurance is not as common as it was just a decade ago. only 52% of Americans currently have life insurance. It was 63% in 2011, according to the 2021 Insurance Barometer Study conducted by Limra and Life Happens, industry-funded groups.
Reading: How to compare life insurance quotes
One of the biggest misconceptions about life insurance is that it’s expensive. You can save on life insurance by comparing life insurance quotes and finding out exactly which policy works for your situation.
Here’s what you need to know about life insurance basics and how to get life insurance quotes.
what is life insurance?
Life insurance is a contract between you and an insurance company. that contract is called a policy. you agree to pay a premium, a one-time payment up front, or regular payments over time, to keep the policy active. In exchange, the insurance company will pay a death benefit to your beneficiary if you die while the policy is in force.
The amount of the death benefit depends on how much coverage you choose to purchase. coverage amounts can range from very small (such as $5,000) to cover funeral expenses to millions of dollars. You can name more than one beneficiary and designate that each receives a certain percentage of the payment. You can also name organizations such as charities as recipients.
The more coverage you buy, the higher your premium. Gender, age, and health status at the time you apply for coverage also affect life insurance quotes. You can secure a lower quote if you get coverage while you’re young and healthy.
If you wait until you have serious health problems, you may not be able to get a traditional life insurance policy because insurers will consider you too risky to insure.
why do I need life insurance?
The primary reason for purchasing life insurance is to provide a safety net for those who depend on you for financial support. If you were to die while the policy was in force, your beneficiaries would receive a tax-free payment that could be used however they chose. that money could help them do the following:
- pay your final expenses, such as funeral services and burial
- help replace your income so your family can pay bills and daily expenses
- help pay off debts, like a mortgage
- help pay for childcare
- help pay for your child’s college education
- Guaranteed Universal Life may have little cash value, but the premiums and death benefit remain constant.
- Indexed Universal Life Insurance may offer the ability to adjust premiums and the death benefit. The cash value is linked to a market index, such as the S&P 500, so the rate of return may vary. indexed universal life policies tend to be complicated and can have high rates.
- Variable Universal Life Insurance offers adjustable premiums and allows you to choose how to invest the portion of the cash value from among the investment options offered by the insurer. With variable universal life insurance, the rate of return will depend on the investments you choose.
- your medical history, including current or past health conditions
- medications you are currently prescribed or have taken in the past
- your family’s medical history (parents and siblings)
- your driving history, especially DUI convictions, reckless driving convictions, or speeding tickets
- risk behaviors, such as smoking, drinking, and using drugs
- dangerous hobbies, like skydiving
- hazardous occupations that include hazardous duties
- financial factors, such as bankruptcy
- criminal record
Buying life insurance could also allow you to leave an inheritance to your children without having to worry about how you’ll spend your own money when you retire. Or it can be a way to leave a legacy because you can donate your life insurance to a charity, organization or cause that is important to you.
Life insurance can also be used as a retirement and tax planning tool. A permanent life insurance policy typically includes a feature that allows you to build cash value. cash value grows tax-deferred and can be accessed as a source of additional income in retirement.
However, this strategy generally makes sense only for high-income individuals who have maxed out on other retirement accounts. It’s important to consult with a financial planner to find out if this strategy makes sense for you.
types of life insurance
There are two main types of life insurance policies: term life insurance and permanent life insurance. And there are a variety of options for permanent life insurance. so it’s important to understand what each type offers before making a decision.
term life insurance
Term life insurance offers a level term period for a certain number of years, usually 5, 10, 15, 20, 25 or 30 years. during this period, your premiums will remain level. the insurer will pay a death benefit only if you die while coverage is in force. The longer term length you choose, the higher your life insurance quotes.
Term life insurance quotes are much lower than permanent life insurance quotes and can be an affordable way to keep coverage going during the years when your family is most dependent on you for financial support.
permanent life insurance
Permanent life insurance offers coverage for life, as long as premiums are paid. it also offers the ability to build cash value that grows tax-deferred. These features make permanent life insurance quotes much higher than term life insurance. Permanent life insurance can also be more complicated than term life insurance because there are a variety of policy types.
Whole life insurance provides lifetime coverage and a cash value feature. It tends to be the most expensive type of life insurance because it offers a guaranteed rate of return on cash value, the opportunity to earn dividends from the insurance company, and the premiums and death benefit stay the same over time.
Universal life insurance offers lifetime coverage, but does not necessarily have the same guarantees as permanent life insurance. Some types of universal life policies allow you to adjust premium payments and the death benefit, within certain limits. and some universal life insurance policies have fluctuating rates of return on cash value.
Guaranteed issue is another type of permanent life insurance. it is aimed at a certain segment of the population: older adults who want a policy that helps pay final expenses. there is no medical exam and you cannot be denied coverage as long as you meet the age requirements. coverage is generally limited to $25,000 or less. And the price is high compared to other policies for the coverage you get.
How much are life insurance quotes?
Age and gender are two factors that influence life insurance quotes. Here are life insurance quotes from multiple life insurers for someone in excellent health who doesn’t smoke.
sample life insurance quotes for $500,000 20-year term life insurance
factors used in life insurance quotes
The main factors that affect life insurance rates are your age, gender and health. women tend to pay less because they live longer, on average, than men. healthy young adults will get the lowest life insurance quotes and be able to lock in a good rate for the life of their policy.
Life insurance quotes will generally incorporate factors such as:
5 things to know before getting life insurance quotes
Don’t let misconceptions about life insurance keep you from getting life insurance quotes. here are some key points.
- Life insurance may be more affordable than you think. the average cost of a 20-year term life policy with a $500,000 death benefit for a healthy woman 30-year-olds is $252 annually or just $21 per month, according to a Forbes Advisor analysis of average life insurance rates. for a man, the average annual fee is $300 or $25 per month.
- The younger you are when you buy life insurance, the less you’ll pay. Your age and health affect the rate you pay. Waiting to buy life insurance means you’ll pay more simply because you’re older. Plus, if you develop health problems, life insurance quotes will be even higher. for example, men who buy a 20-year term life policy with a $500,000 death benefit at age 40 instead of 30 can pay up to 36% more. for women, it’s up to 39% more.
- You may not need a life insurance medical exam. There are many good options for no-exam life insurance. We found several insurers that offer terms of up to 30 years and more than $1 million in coverage, without the need for a medical exam.
- The application process can be quick and easy. If you are in good health, you may be able to apply online and be approved for coverage in just a few minutes without taking an exam medical.
- You should compare life insurance quotes from multiple insurers because prices can vary widely. if you work with an independent insurance broker, the broker will do the price comparison for you.
how to get a life insurance quote
When it comes to buying a life insurance policy, you don’t want to pick a coverage amount or policy length out of the blue. If you do, you could end up underinsured and could leave your family without a sufficient financial safety net.
Here’s how to get life insurance quotes for a plan and coverage amount that fits your needs.
Step #1: Calculate your life insurance needs
The key to determining how much life insurance you need is understanding your financial obligations and financial resources. You want to purchase enough life insurance to cover any financial obligation that your resources cannot cover. you may want more if you want to leave a legacy in addition to providing financial support.
Here are some financial obligations to consider when calculating your life insurance needs:
- Funeral and Burial Expenses: The average cost of a funeral with visitation and burial is $7,848, according to the National Association of Funeral Directors.
- Income Replacement: Consider how much of your annual salary would need to be replaced and for how many years (for example, until all of your children have graduated from college).
- Debts you owe: How much would it cost you to continue making mortgage payments or pay off the mortgage in full? also add any other large debts that need to be paid.
- Childcare: Your spouse or partner may need to hire someone to care for or transport small children if you are not around to help.
- College tuition: Consider how much you want to contribute to your children’s college education and multiply that amount by the number of children you have.
- Emergency savings: Cash reserves can help cover short-term bills or expenses.
- College savings: The more you’ve saved in a 529 or other college savings account, the less you’ll need in life insurance to cover the cost of your children’s college education.
- Retirement Savings: Funds in a 401(k), IRA, or other retirement account could help your loved ones cover expenses or be used as a source of income during retirement. retirement.
- Existing Life Insurance: Consider any existing life insurance policies you may have as resources to cover your obligations. however, keep in mind that you could lose the life insurance coverage you have through work if you leave your job.
- Prepaid Funeral Costs: If you prepaid for a funeral, it’s one less expense you’ll need to cover with life insurance.
- general information such as weight and height
- medical history, including current and past health conditions
- family medical history, such as heart disease between parents and siblings
- medications you are currently taking or have taken in the past
- Online. Most insurance companies offer free quotes on their website. You can visit the websites of various insurers and compare quotes. Or you can save time by using a website that offers quotes from multiple companies.
- by phone or in person. You can call or visit a local insurance agent who can help you get life insurance quotes. Keep in mind that a “captive” agent only works for one insurance company, so be sure to talk to an independent agent who sells policies from multiple insurers.
- full underwriting: This traditional underwriting process requires you to complete an extensive questionnaire, undergo a life insurance medical exam, and give the insurer permission to collect information about you from various third parties. sources. The process can take up to 60 days, but will likely result in the lowest life insurance quote if you’re healthy because the insurer will have enough information to accurately quote the policy.
- Expedited Enrollment: This process is similar to traditional enrollment, but does not necessarily require a medical exam. and it’s faster because it uses data models to assess applicants’ risk. Often, you can apply online, the insurer will instantly collect data from third-party sources, and you can get approved for coverage in minutes. quotes are comparable to fully underwritten policies, but coverage amounts tend to be capped at $1 million.
- Simplified Issue: This process for purchasing simplified issue life insurance is quick and easy. Applicants are required to answer just a few questions about their health and lifestyle, then insurers will use third-party sources to gather additional information about applicants. A medical exam is not required, so insurers can often make immediate decisions about whether to accept or reject applicants. But keep in mind that rates are higher for simplified issue policies because insurers have less information about applicants.
- In the weeks leading up to the test: limit salt intake, drink plenty of water, and eat a healthy diet rich in whole grains, fruits, vegetables, and low-fat dairy products. products, it’s also a good idea to limit your alcohol intake.
- The day before the test: Avoid alcohol, nicotine, and red meat. You’ll also want to avoid over-the-counter medications like antihistamines and decongestants. a good night’s sleep will help improve your blood pressure.
- The day of the test: Avoid caffeine, strenuous exercise, and drink plenty of water. Make sure you have all the necessary documentation, like photo ID and medical information.
Consider the following assets or resources you already have to help cover your obligations:
Here’s an easy-to-use life insurance calculator to help you identify your need.
Step #2: Evaluate Life Insurance Companies
A life insurance policy is a long-term commitment, so you want to find a reputable insurer that has options that fit your needs at a fair price.
For example, if you’re in the market for term life insurance, you may want to consider an insurer’s age limit for renewing the policy or their ability to convert it to a permanent policy.
or, if you want a permanent policy with a cash value component, the best life insurance companies have illustrations of reliable policies, low policy expenses, and superior financial strength.
step #3: collect your information
You will need to provide some basic information for a life insurance quote. this could include:
Step #4: Compare Life Insurance Quotes
The best way to find a good price on a life insurance policy is to compare quotes from multiple insurers. you can get free quotes:
how to apply for life insurance
After you’ve gathered your quotes and chosen an insurer that fits your budget and needs, it’s time to apply for a life insurance policy. the application process will vary depending on the type of subscription being used.
While some insurers may require you to take a life insurance medical exam, more and more insurers can rely on data modeling to assess risk and enable young, healthy applicants to obtain life insurance without an exam.
It’s important to take your medical exam seriously because it will affect the life insurance quote you’re offered. Here are the best tips to prepare for your life insurance medical exam:
how to find the best life insurance policy for you
The best life insurance policy for you will depend on your financial goals and reasons for purchasing life insurance. therefore, you will need to assess your financial situation to find out what you already have to support your loved ones who depend on you financially and what needs to be covered by life insurance.
If you want a policy that gives you financial protection for a certain period of time (like while your children are young), a term life policy will give you the coverage you need at an affordable rate. If you want coverage that lasts a lifetime and provides cash value you can access for as long as you live, a whole life or universal life policy might be a better option.
Consider working with a financial planner who can help you review your situation and determine what type of life insurance will fit into your financial plan. You can find a payment planner only through the National Association of Personal Financial Advisors. or your workplace may offer you access to a financial professional as part of your benefits.
see forbes advisor ratings of the best life insurance companies.
life insurance terminology
beneficiary: the person or organization designated to receive payment from a life insurance policy at the time of the insured’s death.
Cash Value: Money that accumulates in a permanent life insurance policy and can be accessed while the insured is alive through a policy loan, withdrawal, or policy surrender .
Face Amount: The amount of coverage being purchased, such as $500,000 or $1 million.
insured: the person whose life is covered by a life insurance policy.
death benefit: the amount paid to the beneficiary at the time of the insured’s death.
policy: the legal document that details the terms of a life insurance contract.
Policyholder: Also known as a policyholder, the person who owns a life insurance policy. this person is responsible for paying the premiums. the policyholder does not have to be the insured. For example, someone might have a policy on her husband.
premium: a lump sum payment or periodic payments made to keep a life insurance policy in force.
Rider: Additional coverage that can be added to an insurance policy (usually at an additional cost).
underwriting: the process life insurance companies use to collect information about applicants to determine whether to insure them and what rate to charge.