How to compare life insurance quotes

How to compare life insurance quotes

When it comes to comparing life insurance quotes online, by phone or through an agency or broker, there are a few things to keep in mind. Rates for life insurance are based on factors related to your current medical condition, medical history and lifestyle choices, so you may not see vast differences in premiums between companies until you’re underwritten. To find the ideal insurance company to meet your needs, work with a licensed agent or broker. They can help you pinpoint what your financial goals are and help determine which insurer and type of life insurance is best suited for you.

1. 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. For those who use tobacco or nicotine products, the majority of life insurance companies will offer coverage; however, this will typically be at a higher cost. For that reason, it can be helpful to compare rates from the companies that offer life insurance for smokers in order to find a more favorable rate.
2. 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. 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.
3. Gather your information: To get the most accurate quote possible, you'll want to collect your personal and health information. This includes your date of birth, height and weight, information about medications you take, health conditions you live with and information about your family’s medical history.
4. Contact your preferred companies: Answer any questions they have in order to receive your quote. Some companies offer online quotes, others require you to contact an agent to receive a quote.
5. Compare life insurance choices: After gathering the necessary details, you're ready to compare life insurance policies side by side to determine which offers the most value for your needs. Life insurance quotes typically provide insights into the policy type, the coverage amount and the death benefit. Keep in mind that the quotes for term life insurance versus permanent life insurance can vary significantly, not just in cost but also in features and benefits. Therefore, when conducting your life insurance comparison, it's crucial to consider both the features and the costs to make an informed decision.
6. Apply for a policy: After selecting an insurer and deciding on the type of insurance that suits your needs, proceed to apply either through a licensed agent or online. The application process may require a medical examination, depending on the policy specifics. It's also worth noting that after you purchase your policy, you’ll have a "free look" period, typically ranging from 10 to 30 days, allowing you to review the policy in detail and ensure it aligns with your expectations and requirements. This period provides an opportunity to make an informed decision without commitment.

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

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’s helpful to understand what each policy has to offer before obtaining a quote.

Term life insurance policies

Term life insurance provides coverage in the form of a death benefit and has no cash value buildup. 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 unless you have purchased a policy that has the option to renew or convert to a permanent life insurance policy. Term life insurance quotes may be popular with younger families with small children who may depend upon a single or primary financial contributor. It’s also usually a good choice if you only want coverage for a shorter amount of time, for example, as you pay off a mortgage.

Learn more: Best term life insurance companies

Permanent life insurance policies

Unlike term life insurance policies that are in force for a specific amount of time, permanent life insurance policies remain active for the duration of the policyholder’s life (as long as premiums are paid). Another element unique to permanent life policies is that they accumulate cash value. This accumulated value can be used in various ways, such as borrowing against it as a loan, withdrawing a portion of it for immediate needs or using it to pay policy premiums. Keep in mind that if you borrow or withdraw against your cash value and do not replace it, your death benefit will be reduced. There are several different types of permanent policies to choose from, but, generally, permanent policies are much more expensive than term life policies.

Whole life insurance policies

A whole life insurance policy is the most basic type of permanent life insurance. Whole life insurance policies remain in force until the death of the insured. When you pay premiums, a portion of it is put into a cash value account, which will grow at a guaranteed rate on a tax-deferred basis. You can access this cash value via a policy loan, but accessing the funds can affect the death benefit amount your beneficiaries receive in the future.

Learn more: Best whole life insurance companies

Universal life insurance policies

Universal life insurance is a form of permanent life insurance with cash value and flexible premiums. The death benefit may also be flexible, which allows you to adjust your coverage as your needs change. Universal life policies accumulate interest on the cash value of the policy, and the rate of that interest will fluctuate in tandem with current interest rates. In addition to policy loans, many universal policies also provide policy owners the option to withdraw from the cash value account. This will reduce the death benefit, but, unlike a policy loan, it doesn’t accumulate interest you need to pay back.

Learn more: Best universal life insurance companies

Variable life insurance policies

Variable life insurance is a type of policy where the cash value is kept in a separate portfolio that gets invested in stocks, bonds, real estate and commodities. Because of this, your cash value amount can increase or decrease daily based on the market’s performance. It also provides no guarantees of either interest rate or minimum cash value. Variable life insurance was the first policy designed to shift the investment risk to policy owners. Because these policies have the greatest risk, you will have to work with a financial advisor who is licensed to sell variable life insurance, as it’s legally required for agents who sell variable insurance to be securities licensed.

Final expense life insurance policies

Final expense life insurance is a specific type of permanent life insurance policy that is designed to pay for end-of-life expenses like funeral and burial costs. Many of these policies do not require medical underwriting, but coverage limits are relatively low and the premiums may be comparatively higher than other types of coverage.

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 business succession planning, 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 licensed 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. In addition to age, there are other lifestyle factors that affect your life insurance policy quotes and rates:

How much life insurance do I need?

How much life insurance you need will vary based on several circumstances, such as:

• Age
• 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 licensed life insurance agent and financial advisor for guidance.

What age should I buy life insurance?

Deciding on the right age to invest in life insurance is a question with no one-size-fits-all answer. Generally, securing a policy at a younger age could lead to more favorable premium rates, as insurers often view younger individuals as lower risk due to the strong correlation between age and mortality risk. Consequently, premiums tend to rise with age.

Yet, the necessity for life insurance can significantly differ from one life stage to another. What might be a priority for a 25-year-old newlywed could vastly differ from the needs of someone in their 50s making retirement plans. It can be valuable to consider how life insurance fits into your broader financial goals and life plans.

For instance, young adults might view life insurance as a way to financially protect their growing families. In contrast, individuals in their peak earning years might focus more on how life insurance can supplement retirement income or pay estate taxes.

Given the complexity and the personal nature of these decisions, pinpointing an exact age to buy life insurance can be difficult. However, consulting with a licensed life insurance agent could provide invaluable advice. They can guide you through the various options and help tailor a policy that aligns with your evolving needs and goals, ensuring that you choose a plan that is most beneficial for your specific circumstances.

Frequently asked questions