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All Your Life Insurance Questions Answered
If you’re ready to pull the trigger on a new life insurance policy, the following questions and answers can help you determine how much life insurance to buy, where to buy a policy, and how to make sure you get the best price.
How much life insurance do I need?
Nobody can tell you how much life insurance you need, but many experts say most people need at least 10x their income in term life insurance coverage. This means someone earning $60,000 per year should purchase at least $600,000 in term life insurance coverage, and potentially more than that.
As you decide how much life insurance to buy, keep in mind all you would need coverage for in the event of your untimely death. You would want your family to have enough cash to replace your income during the bulk of your working years, but you also need coverage for debt repayment, college tuition, kids sports and activities, mortgage payments, and more.
While it’s easy to buy insufficient life insurance coverage, and many people do, there’s almost no such thing as “too much” term life insurance.
Which factors determine how much people pay for life insurance?
Life insurance premiums are determined using an array of personal information, some of which is beyond the consumer’s control. Factors that can be used to determine your life insurance premiums include your age, where you live, whether you are or have been a smoker, your weight, your medical history, and more.
How much life insurance you hope to purchase — and the term you hope to purchase it for — will also play a role in how much you pay for life insurance. Buying $1 million in term life insurance coverage will always cost more than buying a policy for $250,000, for example. Longer term policies also tend to cost more for older individuals since the risk of insuring people only increases with age.
What are the best steps to take to secure an affordable life insurance policy?
If you want to save money on life insurance, there are plenty of steps you can take right now. These include:
- Buy life insurance when you’re young. You’ll always get a better deal on life insurance if you buy this type of coverage when you’re young. And, the younger you are, the more likely you’ll be able to buy a reasonable amount of coverage for a price you can afford. If you don’t have any life insurance yet, we recommend shopping around and buying a policy sooner rather than later.
- Stick with term life insurance. While you can buy permanent life insurance that lasts for a lifetime, this type of coverage can be exorbitantly expensive. If your goal is creating protection for your family against the loss of your income, then pursuing a term life insurance policy may give you the peace of mind you need at a much lower cost.
- Shop around and compare providers. Like any other financial product, life insurance shouldn’t be purchased from the first provider you come across. You should compare policies and prices with at least 3-4 life insurance companies before you pull the trigger. You may be surprised at how variable pricing can be — even for the same amount of coverage and same term.
- Quit smoking. Life insurance is considerably more expensive for people who smoke cigarettes, and smoking could even prevent you from finding coverage at all. You should quit smoking right away if you hope to secure an affordable life insurance policy.
- Pay annually. Check whether your life insurance provider offers a discount if you pay an entire year’s premiums at once. If they do, you may be able to save by coming up with the money for a year of coverage upfront.
Why is term life insurance so popular?
When it comes to buying life insurance, you’ve probably heard that term life insurance policies are the most common type of policy purchased. The reasons behind this trend are simple. Because term life insurance only lasts for a specific term (usually 10 to 30 years), this product is considerably more affordable than whole life insurance, which doesn’t expire. In fact, you can frequently purchase $250,000 or more in term life insurance for less than the price of a dinner out with friends each month, and buying more coverage can also be affordable if you’re relatively young and in good health.
Term life insurance is also popular due to the fact you can shop around and compare policies and life insurance providers online. You may even be able to apply for a life insurance policy online, get approved within 24 hours, and have coverage in place within a few business days. This isn’t the case with other types of life insurance, including whole life.
Can you have more than one life insurance policy?
You can have more than one life insurance policy in place, and many consumers choose to do so for strategic reasons. For example, it’s common to “stack” term life insurance policies that last for different terms. As an example, you might buy one 30-year term policy for $500,000 that’s meant to last until your kids are through college, then stack that policy with another 20-year term life insurance policy in a similar amount meant to provide additional coverage during your highest earning working years.
Many people also have a certain amount of life insurance through their employer, although this coverage may be insufficient and shouldn’t be relied on since you may lose it if you switch jobs. For that reason, it’s very common for workers to have one life insurance policy through work and another term policy meant to provide ongoing coverage for their family regardless of what happens in their career.
Do you have to complete a health exam to qualify for life insurance?
While some life insurance companies do require medical exams, an array of technology-focused life insurance providers have increasingly relied on complex algorithms to determine who can qualify for one of their policies. With that in mind, it’s important to note that some life insurance companies now offer life insurance with no medical exam.
While completing a health exam may be inconsequential if you’re young and healthy, being able to skip this step comes with significant benefits for the consumer. With no medical exam life insurance, it’s possible to apply for life insurance online and have coverage in place within just a few business days. You can also save time and avoid any stress involved in having a medical exam, which could include a blood draw.