Take the mystery and confusion out of buying life insurance.
Most people don’t seriously consider life insurance until a major life event springs up. Marriage and welcoming a child into the family are joyous occasions, but they can spawn a far less happy question. What happens to your spouse and child if you’re not around?
Learning about life insurance can quickly become a priority. Consider balancing the cost of the policy against your family’s future to help determine if life insurance is best for you.
Compare quotes from 16 life insurance companies side by side.
- Compare multiple providers
- Calculate how much coverage you need
- Get a quote in 2 minutes
Why we like: Policygenius
Compare quotes from 16 life insurance companies side by side.
- Get the coverage amount and term that's right for you.
- Choose between term or whole life insurance.
- Easy online application process.
How to buy life insurance
You’ll typically find a few ways to purchase life insurance. Based on where you’re at in life, your employment and your health, you may favor one over the other.
Buying life insurance has gotten a lot simpler over the last few years. New startups have made getting quotes and buying policies online a breeze. These companies below allow you to quickly compare rates from multiple providers at once.
Through an agent
Agents work with one or more insurance providers. As employees or contractors for these companies, they’re going to try to sell you a policy from them. That doesn’t necessarily mean you shouldn’t speak with an agent just because you haven’t nailed down which company you want to work with yet.
All agents must be licensed and should be knowledgeable about the types of insurance and riders and how they fit different financial and family needs. Once you’ve decided on a policy, your agent assists you with your application, gather documents and implements it once approved.
Through your employer
Life insurance through your employer or professional association is called group insurance. Organizations like Universities, unions and any other group of professionals offer group insurance can offer life insurance though one provider. Unlike using an agent or making a direct purchase, you likely won’t have a choice of provider. The employer or the association you use to sign up for the insurance typically has a contract with a single provider.
When you’re hired by an employer or join a large association that offers life insurance benefits, you’ll likely have a timeframe to sign up. You’ll be given information about the policy and provider, and you may be able to select a few items such as your plan type and benefit amount.
Payments are made a little bit differently for group plans. Employers usually take out a flat amount from each paycheck to cover your premium, whereas associations may include the cost in your annual dues.
Through a provider directly
Though it’s probably the most straightforward way to buy life insurance, going directly through a provider is also the most independent way to purchase it. You won’t have an agent at your side or a preselected policy. Instead, you’ll be the one to compare multiple providers and choose your best plan.
Many insurance companies still require you to meet with an agent before you buy, but you can still shop and compare online ahead of time. When it comes to finally purchasing the policy, you’ll be more effective in pushing back against sales pitches that my not be as applicable to your needs.
Compare life insurance companies
How to buy life insurance wisely
When purchasing life insurance, consider the two types out there — term and permanent.
Term life insurance
Younger people in good health are typically more likely to be sold term life insurance. This type of insurance typically lasts for 10, 15, 20, 25 or 30 years. During the term, premiums may increase every few years on a set schedule.
Because the insurance term ends, it may seem like a strange way to go when a lasting option is available. Its appeal becomes obvious when you look at the cost, as premiums for term life insurance are typically far lower than that of permanent policies.
Outliving a term life insurance policy doesn’t always mean it will end. Once the term is up, you may be able to convert it. Conversion to a permanent policy will likely change your premiums, but they’re unlikely to change again after the initial switch.
Permanent life insurance
As the name implies, permanent life insurance lasts as long as you do — as long as you pay your premiums. This is where life insurance divides again, splitting into three major types.
- Whole life. As you pay your whole life premium, your account builds a cash value that you can then take a loan out against. However, any money borrowed that’s not paid back is deducted from the total benefit payout. You may also see premium increases over the duration of your policy.
- Universal life. A certain amount of flexibility is allotted with universal life policies. You may increase or decrease your coverage and change the amount and frequency of your premium payments throughout the length of the policy rather than keeping them static. Cash value is based on a variable rate that you may be able to borrow against or use to limit payments.
- Variable life. You’ll find that variable life has many similarities to universal life. You get an amount of flexibility with premiums and your benefit. The biggest difference is that you’re able to invest what would go into the cash account into securities, such as stocks, bonds and mutual funds.
Permanent life insurance guide
Once you’ve decided your policy type, you should think about coverage.
What affects how much coverage I need?
One method to determine what you’ll need is DIME: Debt, income, mortgage and education.
- Debt. Any debt that’s still owed needs to be dealt with by your family. Outstanding auto and private student loans and credit card balances should be carefully considered when you’re choosing a coverage amount.
- Income. Consider your income when choosing a coverage amount. Some agents say to shoot for 15 times your annual income, while others recommend more than three times your income, plus any out standing debt. The goal is to supplement what you would have contributed to your family’s finances for that length of time.
- Mortgage. Similar to debts, you may want to include the amount left on your mortgage.
- Education. This one is specific to those who have children. The cost of going to college, or even to a private school, can be quite a burden. By adding it into your coverage amount, you can potentially help ease that weight.
Other factors to consider:
- End-of-life expenses. Though it may seem grim you’ll likely need to nail down your end-of-life plan or at least have be able to make a reasonable estimate. Curious types may even enjoy looking at potential green alternatives to traditional burial such as hydro cremation or burial pods.
- Inflation. The coverage you get now will likely not be worth the same in 30 years. Accounting for inflation may be especially important for those who are interested in policies without flexible coverage amounts.
- Local and federal taxes. Though estate taxes are usually only applied to large amounts, there are six states that assess an inheritance tax. Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania have inheritance taxes that vary based on which state you’re in. Exceptions do apply for some beneficiaries though, so you may want to consult with a tax adviser or an adviser who works in estate planning.
- Number of policies. You’re not restricted to buying just one policy. Opting to buy more than one means taking into consideration the total coverage you need and how you want to partition that amount.
How do I compare life insurance companies?
- Policies offered. A good way to start filtering companies is to check if they have the type of policy and riders you’re looking for.
- Coverage options. How much you need is another good way to filter your options. Not all providers will offer $1 million in coverage, and those that do may not offer as low as $2,000.
- Cost of coverage. Consider what you can afford. Starting a life insurance plan that has premiums you can’t keep up with will likely just lead to a lapse in the policy.
- Financial strength. Many insurance companies are rated on their financial strength — their ability to pay out benefits. A.M. Best, Fitch, Moody’s and Standard & Poor’s are four insurance rating organizations and each has its own rating system.
- Customer ratings. The experiences of other consumers may shed light on certain aspects of the provider that would otherwise be difficult to assess without already being involved with them.
- Customer service availability. Applying for life insurance or settling a claim can be a lengthy and confusing process. Having helpful customer service can make all the difference.
- Claims process. The last thing anyone wants is for their family to jump through hoops to receive benefit. Take a look at a provider’s claims process and note what’s needed and who’s required to file it.
What affects my life insurance premiums?
Each insurance provider has its own underwriting process. As such, some put more weight on certain evaluation factors over others. Take a look at a few points that will be assessed:
- Age. How old you are plays possibly the biggest role in determining your premiums. The younger you are, the lower your premiums will typically be.
- Gender. Women typically end up with lower premiums than men, mostly due to women having a higher average life expectancy.
- Certain health indicators. When a medical exam or medical questions are involved, your weight, height, blood pressure and any history of major diseases or conditions help determine your premiums.
- Family health history. Major health conditions and diseases in your immediate family that have lead to death are likely taken into account. Cancer, cardiac arrest, kidney disease and stroke are among what may affect your premiums.
- Smoking. Frequency and the last time you smoked will likely be considered when determining how much you’ll pay in premium. If you are a smoker, you might want to read up on our life insurance for smokers guide
- Substance use. Alcohol use that has resulted in doctor-mandated rehabilitation and illegal substance abuse are likely to increase your premiums.
- High-risk occupations and hobbies. Certain occupations and hobbies are considered riskier than others. Being a lumberjack is objectively more dangerous than working in accounting. Likewise, skydiving will earn your application more scrutiny than needlepoint.
- Driving and criminal records. Several tickets within a short period of time, DUIs and arrests can contribute to what your policy costs.
What should I expect when I apply for life insurance?
Your application will depend on if you’re applying for a group plan, with an agent or on your own. Group applications are usually a simple form that is filled out and signed. From there, the deductions are automatic and the coverage lasts until your employment ends or the policy gets changed by your employer.
Applying with an agent or directly will be a different experience. Once you’ve decided on your policy, you’ll need to provide some information including:
- Phone number
- Verifiable income
- Smoking status
- Alcohol and substance use
A cover letter may be necessary to include details about any of the listed information that aren’t requested in the application.
Once your application is submitted you may be subject to a medical exam if one is required for the policy. The insurance company will likely send a medical representative to you rather than make you go to a clinic.
After all of the above is submitted it becomes a waiting game. Underwriting can take anywhere from a few business days to upwards of eight weeks.
Upon approval you’ll be asked to finalize the policy contract and beneficiaries. With that, your policy will be enacted.
It should be noted that many plans have clauses regarding when the full benefit amount becomes available. Typically if you die within the first year, your beneficiaries will only be given the premiums you paid until your death rather than the full coverage amount.
Purchasing life insurance doesn’t have to be an intimidating process when you equip yourself with knowledge. By learning and taking steps to better understand the process, you’re making sure your family is taken care of regardless of what happens in the future. To get the most out of your life insurance, talk over plans with your spouse, research companies thoroughly and compare life insurance providers to find the policy that best fits your needs.