Do you really need to get life insurance quotes from lots of companies?
I have seen so many clients who ask this question.
If you want to save money, then my answer is a definitive, yes!
Not all life insurance policies are the same (nor are the companies who offer them).
For this reason, you should absolutely get a lot of quotes all at once to see what is actually going to be the best decision.
Did You Know: there are hundreds (yes, hundreds) of life insurance companies who offer coverage, and each of them has their own pricing model!
If you’re still undecided, keep reading…
Like buying anything else, there’s no reason to not to get a bunch of life insurance quotes all at once; they’re free, and you don’t even have to give up much information at all.It
Here’s some quick navigation to help you find what you need as quickly as possible.
Do You Need Life Insurance?
If you read my blog regularly, you know I took out a $2.5 million policy on myself so if anything happens to me, my wife (who is my life insurance beneficiary) will be able to spend her time mourning and keeping the kids lives in order as much as possible.
She will not have to think about how the mortgage gets paid or how to make ends meet.
If you don’t have someone who is directly dependent on your income then you will want a small policy which will make it easy to take care of any financial obligations you may have.
This will make it easier for the executor of your estate to clear up any final expenses.
Here are the most common reasons people buy life insurance:
How Much Life Insurance Do You Need?
All the time, I get questions about life insurance, but especially this one, and the answer is always, “It depends.”
It depends on how much you are making, what your financial obligations are, and how much debt you have (among other things).
As a rule of thumb, most people will get about ten times their annual income.
This will typically leave enough money for a spouse to get the finances straightened out and still have plenty left over to replace your income.
If you have large amounts of debt, you may want to increase the number to make sure you wipe out all the debt your family has and still have a sizable nest egg for your family.
Of course, you do not want such a large policy where you have to sleep with one eye open at night.
If one person in your family is a stay at home parent, you will need a decent size policy on them just to cover the cost of all the duties they take care of.
It is hard to estimate the cost of shuttling kids, cleaning, etc. but you know if you had to replace them, there is a significant cost.
I frequently see families get between $250,000 and $500,000 of coverage on a non-income producing spouse.
Finally, if your personal obligations are small and you just need to make sure your estate and final expenses are taken care of, you can look at a policy which is tailored to just your needs.
I have seen people purchase as low as $10,000 worth of coverage just to tie up any loose ends.
What Types of Policies Are Available?
Overall, there are still two primary types of life insurance which are available in the marketplace today.
There are actually several other types within each of these two types, but we’ll get to that in a minute.
Term Life Insurance
With term life insurance, the policy consists of pure death benefit coverage in return for the payment of a premium.
These particular policies do not contain any type of cash value or investment component.
This is why term life is considered to be the most basic form of life insurance there is.
It is also typically the most affordable – especially for those who are young and in good health. In fact, for individuals who wish to obtain a large amount of death benefit for a low premium cost, term policies can be a very good option.
As the name suggests, term life is sold for specific time periods, or “terms.”
These are usually:
- 10 years
- 15 years
- 20 years
- 30 years
Although there are some term life plans which are sold for as short as 1-5 years, and for as long as 40.
When a term policy expires – provided the insured has held the policy throughout its entire length – and if the insured still wants coverage, he or she will need to re-qualify for another policy at their then-current age and health condition.
Because they will be older – and they may also possibly have an adverse health condition – the new policy’s premium will likely be higher. If the individual has been diagnosed with various health conditions, they may be deemed as uninsurable and may not be able to obtain future coverage.
Because a term policy is considered to be “temporary” coverage, it is oftentimes thought to be a good way to cover temporary needs.
As an example, this type of insurance may be a good way to cover the cost of a child’s future college education if a parent or grandparent were to pass away before the child turns age 18.
Likewise, term life insurance can also be a good way to ensure a 15 or a 30-year home mortgage will be paid off if a breadwinner passes away while there is still a balance to be paid off.
Term Life Insurance Quotes
The premiums for term life insurance plans are typically lower than those for whole life insurance – especially for applicants who are young and in good health. These policies can provide a great way to purchase a high amount of death benefit coverage for a very low price.
In fact, if you’re looking for the cheapest life insurance you can buy, it better be a term policy.
In some cases, term policies may include a conversion rider will allow the policy to convert over into a permanent policy after a certain period of time.
When looking at your first set of term life insurance quotes the premiums may vary greatly.
There are several different types of term policies which are available in the marketplace today:
- Renewable – This type of term coverage is able to be renewed by the insured after each time period – or “term” – has elapsed. This is allowed without the need to complete a new application for coverage or to pass a new medical examination. Just understand, the price will rise.
- Convertible – With convertible policies, the insured is able to convert from a term policy over to a permanent life insurance policy in the future. Provided the conditions of the policy have been met and the premium payments have continued to be made, there will be no medical exam required in order to do so.
- Decreasing – With a decreasing term policy, the amount of the death benefit will decrease over time, until it gets to zero. At that time, the policy ends. These tend to be matched to something like a mortgage, for example, and matches the decreasing amortization table.
Because there are so many different types of term life insurance on the market today, applicants can pick and choose which will work best, based on their specific coverage needs and goals, essentially allowing them to “customize” their coverage.
Permanent Life Insurance
This type of life insurance will include both a death benefit and a cash value component.
The cash value in a permanent policy is allowed to grow on a tax-deferred basis.
This means there are no taxes which are due on the gain until the time the money is withdrawn. This can essentially allow the cash to grow and compound on an exponential basis.
Unlike term life insurance, permanent life policies do not have any type of set duration of coverage, but rather they last indefinitely. Those who purchase permanent coverage will typically plan to keep their coverage for the “whole” of their lives.
These plans are usually intended to cover longer-term needs, as well, and they are oftentimes used in estate planning.
Permanent life is also often purchased on younger individuals and then kept for many years. This way, the person has life insurance coverage, along with a savings vehicle which grows tax-deferred over time.
There are three main types of permanent life insurance:
- Whole Life – the most common permanent policy. It has the standard death benefit and uses a savings account as its investment piece. Along with deposits from your regular premiums, the savings account grows from dividends the insurance company pays into the account. To help you get a better understanding we did an entire write up on whole life insurance.
- Universal or Adjustable Life – These policies offer a greater amount of flexibility than standard whole life policies. Many offer you the opportunity to increase your death benefit after passing a new medical examination. These policies will also let you pay your premiums from your cash balance. This can be a useful feature in times where your personal finances are stretched. Get a better understanding of our article on universal life insurance policies.
- Variable Life – Similar to whole life except you can take the money in your savings account and invest it in stocks, bonds, mutual funds, and money market accounts. This comes with more risk so make sure you have a good grasp on those risks before purchasing a variable life insurance policy.
Permanent Life Insurance Quotes
Permanent life insurance quotes will be higher than term life quotes for a comparable amount of death benefit coverage on an individual.
However, this is typical because, with permanent coverage, the policyholder is not just purchasing death benefit coverage, but also the cash value component within the policy.
In addition, unlike term life insurance, a permanent policy will not expire after a certain number of years. Rather, provided the premium continues being paid, the permanent policy will continue indefinitely.
How Do You Know You Are Using A Good Company?
What I like most about the life insurance quotes you are getting from the tool on my site is you only get top rated carriers.
This means they pass standards for financial stability and for fulfilling the claims necessary.
There are several rating agencies in the industry such as:
They will assign ratings to insurance companies based on a wide spectrum of data points, both looking forward and looking back.
These ratings are based on factors such as the financial strength of the company, claims payout, and reputation in the industry.
In most cases, these ratings are letter grades similar to those on a report card. It is important to stick with insurance carriers who have high grades in the “A” range.
For most people, it is hard to understand what it actually means to be secure, so I also put together a list of who I consider to be the 10 best life insurance companies.
Keep in mind the life insurance quotes you get here may include some other more localized companies when you get your own quotes, so your results might vary.
How Are Life Insurance Quotes Determined?
When determining the price of a life insurance policy, there are several key criteria which go into coming up with the final quote.
These can include the following:
1. Type of Policy
One of the biggest factors in coming up with the premiums is what type of coverage you are purchasing.
For example, will the coverage be term or permanent? In most cases, especially if an applicant is young and in good health, a term quote will be lower – at least initially. However, over time, as an applicant gets into the older ages, whole life insurance can become more competitive.
2. Face Amount
The face amount refers to the amount of death benefit coverage you are purchasing.
This, too, will be a primary factor in the amount you will be quoted for life insurance. As with most other types of goods or services, the higher the amount of coverage you are purchasing, the higher the quote will be.
There are many different riders which may be included on a policy to help in customizing it more towards the insured’s needs and goals.
These “add on’s” can add to the overall price of the policy.
4. Age of the Applicant
The applicant’s age is another key criteria in how much the insurance quote will be. A big part of the cost of life insurance is based on a person’s life expectancy.
Therefore, your age at the time you apply will certainly factor into the price of your coverage.
5. Applicant’s Health Condition
Another primary factor which could affect the quote on a term or whole life insurance policy is the applicant’s health condition.
Life insurance underwriters consider many different factors when pricing coverage – as well as deciding whether or not an applicant will even qualify for coverage at all.
Some of the main components regarding a person’s overall health and body which are considered include his or her age, height and weight, overall health history, and family health history. Also considered is whether the person smokes and/or drinks alcohol (and if so, how often).
In addition, other criteria will also be examined such as whether the applicant participates in any type of dangerous or “risky” hobbies or occupations, takes prescriptions, or has financial issues.
All of these criteria will be considered in order to determine the person’s overall risk to the insurance company.
6. Insurance Company
The insurance company itself will also have a bearing on the amount quoted for term or whole insurance coverage – even with all other factors being equal.
When comparing insurance rates, individuals will find policies have very similar – or even the same – benefits, yet will have drastically different premium quotes.
For this reason, it is always a good idea to compare three or more quotes prior to making your final decision on a term or a whole life insurance policy.
When reviewing an insurance company, it is always important to take a look at the financial strength of the insurer. This is because you will want the company to be there in the future when it is time for the claim to be paid out.
NOTE: Just because you are given a certain quote does NOT mean you are approved at that rate! You still have to qualify.
Get A Quote Now
I really hope all this information helps you to make the best life insurance decision for you and your family, and I hope you will take this very important step with your finances.
Life insurance is not sexy, but it’s one of the most foundational pieces to your financial plan you can put into place, and a key part of any insurance portfolio.