How To Buy Life Insurance

1. Decide how much coverage you need
When deciding on how much insurance to buy, there are a number of questions to answer: If you died, how much income would your family lose during your prime working years?
How much is your mortgage, car loan and other major debts?
Do you have children and do you expect to pay for their college education?
How much do you have in savings, investments and other assets? There’s several different ways to crunch the numbers: The 10 times method One way to get a ballpark figure is to multiply your annual income by ten. So, if you make $100,000 a year, you want a death benefit of at least $1 million (In comparison, most workplace life insurance policies only pay out one or two times your salary.) The DIME method Another strategy is to add up your: Debts : All the debt you would leave to your family after your death.
: All the debt you would leave to your family after your death. Income : Your annual income multiplied by the number of years you think your family would need your financial support after you die.
: Your annual income multiplied by the number of years you think your family would need your financial support after you die. Mortgage : The balance on your home loan plus insurance and property taxes.
: The balance on your home loan plus insurance and property taxes. Education expenses: How much it would cost to put each of your children through college. Of course, these are broad approaches that might not fit your circumstances. Working with a financial advisor will enable you to get more personalized guidance.
2. Choose the type of policy you want
While there are many types of life insurance, the two main categories are term and permanent. Term life insurance Term life provides coverage for a specific number of years and is generally more affordable than permanent life insurance. Many families rely on term life to protect them during their high-earning years when they may be raising children or paying off a mortgage. Two of our top picks for term life insurance, Ladder and Amica both offer affordable rates and an easy application process.
Ladder Life Insurance Learn More Cost The best way to estimate your costs is to request a quote
App available No
Policy highlights Ladder is a digital-first life insurance company offering up to $3 million in coverage without an exam. It only offers a single term life insurance policy without riders, but Ladder’s policies offer the option to increase or decrease coverage as your needs change.
Amica Life Insurance Learn More Cost The best way to estimate your costs is to request a quote
App available Yes
Policy highlights Amica offers four straightforward life insurance options — a level term life insurance, and whole life insurance policies payable for 20 years or until ages 65 or 100. Both term and whole life insurance policies include a terminal illness rider for free, allowing for an advanced death benefit if the insured is diagnosed with a terminal illness.
Permanent life insurance As the name suggests, permanent life remains in force for your entire life as long as the premiums are paid. It also can include a cash value component that grows over time.
This type of policy is much more expensive but it can also be more beneficial for long-term financial goals, like estate planning or providing for a dependent with lifelong care needs.
There are a few types of permanent life insurance: Whole life insurance: Like term life, whole life insurance has a fixed monthly premium and a guaranteed death benefit. Because whole life insurance is more complex, you usually need to work with a broker or advisor to buy a policy.
Like term life, whole life insurance has a fixed monthly premium and a guaranteed death benefit. Because whole life insurance is more complex, you usually need to work with a broker or advisor to buy a policy. Universal life insurance: With a universal life insurance policy, your premiums are invested in the market. That can mean lower monthly payments for you but it requires you to monitor your policy carefully or risk your plan being underfunded.
With a universal life insurance policy, your premiums are invested in the market. That can mean lower monthly payments for you but it requires you to monitor your policy carefully or risk your plan being underfunded. Final expense life insurance: If your prime interest in life insurance is making sure your loved ones aren’t burdened with paying for your funeral or other end-of-life expenses, a final expense or burial insurance policy is another kind of permanent life insurance. Policies are usually capped at $25,000, but you can often get approved with no medical exam. State Farm is one of our top choices for whole life insurance, with plans that offer a variety of payment options and riders like a waiver of premium, an accelerated death benefit and the option to add a child’s term policy. Ethos offers a standout final expense policy, with a payout of up to $25,000 and a free will and estate planning tools.
State Farm Life Insurance Learn More Cost The best way to estimate your costs is to request a quote
App available Yes
Policy highlights State Farm offers a variety of term, whole, and universal life insurance products to choose from, alongside other types of insurance. It’s rated highly for both financial stability and customer service.
Ethos Life Insurance Learn More Cost The best way to estimate your costs is to request a quote
App available Yes
Policy highlights Ethos advertises term and permanent life insurance products and offers a free will and estate planning tools with a policy.
3. Shop for a plan
To ensure you’re getting the best deal, get rate quotes from at least three providers. Be sure to consider: Available policy options Some life insurance companies only offer term, while others may lack no-exam policies. Limit your search to providers that offer the kind of policy you want. Coverage limits If you’ve figured out how much coverage you want, pick providers that offer that amount. If an insurer has a minimum death benefit that’s far beyond your requirements, it might not be a good fit. On the other hand, if you’re the breadwinner for a family with a mortgage and three kids going to college, make sure the maximum coverage limit will be enough. Restrictions Not all insurance companies are licensed nationwide or offer the same products in every state. In addition, some plans are only available to applicants within a certain age range.
Before you get too deep into investigating a company, make sure you’re eligible for the policy you want. Rates While low premiums sound like a good idea, it doesn’t tell the whole story : A cheaper policy may have a smaller death benefit, fewer options for riders or more restrictive requirements for approval.
That’s why it’s best to get quotes from multiple insurance companies with the same term length, death benefit and riders. Riders Also known as endorsements, riders allow you to customize your policy. Common riders include being able to convert a term policy to whole life, coverage for dependent children, guaranteed insurability and the option to receive benefits if you’re diagnosed with a terminal illness or need long-term care, Customer service You’ll have your policy for a long time — potentially for the rest of your life — so make sure the insurance company you choose delivers the kind of customer service you want. J.D. Power’s individual life insurance surveys are a good way to see how current customers feel about their providers and the claims process. You can also look at a company’s Better Business Bureau grade and the volume of complaints that have been registered with the National Association of Insurance Commissioners.
You should also consider whether it’s important for your provider to have an easy-to-use website and mobile app and customer service hours on nights and weekends. Financial strength Check out a company’s A.M. Best financial strength ratings to see how likely it will be able to pay out your benefits when the time comes. A grade of