Getting life insurance can feel like a daunting task. There are so many options and variables to consider. How much coverage do you need? What policy type makes the most sense for your situation? This comprehensive guide breaks down everything you need to know to find the perfect life insurance policy to protect your loved ones.
Factors That Affect Life Insurance Rates
Insurers use several factors to determine your rates and eligibility. Understanding what impacts pricing can help guide you as you shop for plans. The main rating criteria include:
- Age – Rates are significantly lower when you are young and healthy. Premiums increase as you age. Buying earlier locks in better long-term prices.
- Health and Medical History – Conditions like diabetes, heart disease, cancer, stroke, etc. can increase rates or prevent qualification. Insurers may request medical exams or records.
- Lifestyle Factors – Certain hobbies, travel destinations, driving history, tobacco and alcohol use can increase rates.
- Family Health History – Some hereditary conditions may impact pricing and eligibility.
- Height/Weight Ratio – Being significantly overweight or underweight can increase rates.
- Occupation – High risk jobs often pay higher premiums. Office jobs tend to have lower rates.
Having a clean medical history, healthy lifestyle, and optimal health metrics will qualify you for the lowest possible pricing. Even if you aren’t in perfect health, it’s still smart to shop around. Many companies offer adjusted pricing to accommodate a wide range of conditions.
Types of Life Insurance Policies
There are several policy structures to evaluate. Different products serve unique needs.
Term Life Insurance
Overview: Provides coverage for a specific period of time, typically 10 to 30 years. If you pass away during the term, your beneficiaries receive the payout. If the term expires and you are still living, coverage ends without payout.
Best For: Low cost coverage when need is temporary (i.e. covering mortgage, young children). Often converted later to permanent insurance.
Considerations:
- Lower premiums than permanent insurance but not a lifelong policy.
- Renewability is not guaranteed. Rates often increase each renewal period.
- Limited long term value – no cash value accumulation or loans.
Learn more about term life from PolicyGenius →
Whole Life Insurance
Overview: Offers permanent, lifelong coverage as long as premiums are paid. Combines death benefit protection + tax advantaged cash value savings.
Best For: Final expenses planning, income replacement, estate planning, business/charity planning. Locks in insurability when young.
Considerations:
- Guaranteed level premiums never increase.
- Accumulates cash value at a fixed rate of return.
- Fewer investment options than universal or variable policies.
- Higher premiums than term insurance.
Learn more about whole life from Haven Life →
Universal Life Insurance
Overview: Offers permanent coverage with flexible premiums and adjustable death benefits. Includes both insurance protection and tax deferred cash value growth.
Best for: Custom coverage with adjustable terms over time. Supplementing retirement savings in a tax advantaged way.
Considerations:
- Premium flexibility but cost can become prohibitively expensive if funding lapses.
- Returns linked to market performance for potentially higher growth.
- Intricate policies require close tracking to avoid lapsing.
- Watch for higher fees than traditional whole life policies.
Learn more about universal life from Dave Ramsey →
Final Expense/Burial Insurance
Overview: Small coverage policies ($5,000-$50,000) specifically for your final burial/cremation costs. Simplified underwriting and very affordable, guaranteed premiums.
Best for: Covering funeral costs to avoid burdening family, low income households, seniors.
Considerations:
- Small face values limit broader financial protection.
- Avoid policies with increasing/adjustable rates.
- Look for guaranteed acceptance without medical exams.
- Compare “graded death benefit” limitations across companies.
Learn more about final expense insurance from AARP →
Guaranteed Issue Life Insurance
Overview: No medical exam policies with approval guaranteed. Face values under $25K. Appeal lies in easiness to qualify if health is poor.
Best for: Those with terminal illness expected to pass within 1-2 years. Quickly create small estate for final expenses.
Considerations:
- Typically only approves adults 40-85 years old.
- Low coverage maximums (<$25K) limit broader usage.
- Much higher premiums per $1K coverage vs. medically underwritten policies.
- No cash value, savings, or investment elements.
Learn more about guaranteed life insurance →
Accidental Death Insurance
Overview: Supplemental policies that pay out if death occurs due to accident. Add affordable high risk activity coverage.
Best for: Thrill seekers and adrenaline junkies needing extra coverage for extreme hobbies like skydiving, rock climbing, BASE jumping.
Considerations:
- Typically purchased to supplement existing life insurance.
- Only pays if death is accidental so other policies still needed.
- Extra coverage also offered within some life insurance plans.
- Read the fine print on qualifying accidents carefully.
Learn more about accidental death insurance →
Monthly Cost Estimates By Age
| Policy Type | 25 Year Old Male | 25 Year Old Female | 45 Year Old Male | 45 Year Old Female |
|---|---|---|---|---|
| 10 Year Term Life | $13 | $11 | $23 | $18 |
| 20 Year Term Life | $16 | $14 | $43 | $28 |
| Whole Life | $47 | $40 | $94 | $69 |
| Universal Life | $60 | $47 | $141 | $90 |
Rates shown are monthly costs for $250K coverage from Bestow in excellent health. Prices vary between carriers.
The best life insurance companies offer free instant quote tools online to compare customized rates. Getting quotes from 3-4 top insurers ensures you find an optimal fit for budget and needs. Our reviews help you see pricing from leading carriers side-by-side.
What is the Right Life Insurance Coverage Amount?
Deciding on an appropriate policy face value relies on a careful analysis of several financial factors:
- Final expenses – At minimum, ensure benefits exceed projected funeral and estate settlement costs.
- Debt coverage – Account for high interest debts (mortgage, loans, credit cards) to be paid upon death.
- Income replacement – Estimate the present value of lifetime earnings still needed to maintain dependents current lifestyle standard.
- College funds – If you have young children, project future college costs you would still save for if alive.
- Emergency funds – Never hurts to give extra buffer for surviving family to handle unforeseen costs.
Various life insurance calculators simplify this needs analysis. We recommend 10-20X your gross annual income as a reasonable estimate for most families. Higher earners, sole breadwinners, and those with many debts/dependents may require 25-30X or more.
Buying Tips to Get the Lowest Rates
Follow this checklist as you shop policies to secure the best pricing:
✓ Get fit – Shed extra weight, quit tobacco, and improve health before applying. Small lifestyle changes can save thousands over the life of a policy.
✓ Compare quotes – Even minor differences in health, age, and other factors can drastically swing pricing between insurers. Cast a wide initial net.
✓ Review ratings – Only consider “A” rated, established insurers with strong financial backing and history of claims payment. Avoid riskier companies with lower ratings.
✓ Understand underwriting – Simplified issue means easier approval but costs more. Fully underwritten policies require medical exams for the best rates possible.
✓ Check coverage terms – Carefully review limitations related to contestability periods, exclusions, non-payment lapse rules, and guaranteed renewability.
✓ Consider a broker – Free broker services shop hundreds of insurers for you, saving huge amounts of time researching individually.
Tips For Saving Money On Premiums
Getting life insurance coverage for less comes down to leverage. Follow these tips to minimize what you pay:
Bundle with other policies – Many insurers offer discounts when you purchase multiple policies like life, health, home, auto, disability, etc. Combining coverage saves 10-15% on total premiums.
Pay annually – Paying policy premiums in lump sums annually rather than monthly saves on financing fees and admin costs. Just ensure to have funds set aside.
Increase deductibles – Accepting higher deductibles on policies like disability insurance reduces premiums substantially while still guaranteeing important backbone protections.
Buy young – Life insurance rates for 20 year olds often start below $15/month. Buying early locks in low pricing for life. Waiting until health declines means paying 2-3X more later.
Quit smoking – Kicking a tobacco habit saves 40-60% almost immediately on life insurance over smokers. If needing coverage now, get quotes both ways.
Improve health – Losing weight, adding exercise, getting cholesterol and markers like blood pressure under control all translate to better pricing.
Lengthen term – Going from 10 to 20 years on term life cuts annual costs significantly. This maintains low pricing for more years before renewal rate hikes hit.
Take a medical exam – Fully underwritten policies cost 30-50% less than simplified issue life insurance without health screening. The savings often outweigh the hassle.
Use online quotes – Skip agent middlemen and get quotes yourself online. No commission fees lowers pricing 5-10% with the same carriers.
Compare carefully – Identically structured policies run the full gamut in pricing across insurers. Dig line by line when comparing plans.
Evaluating Insurer Financial Strength
Choosing life insurance carriers boils down to risk. You pay premiums for decades expecting a later payout. Ensuring the company remains solvent is critical before signing any contract.
Independent rating agencies like A.M. Best, Standard & Poor, and Moody’s assign letter grades measuring an insurer’s financial strength and ability to pay out claims. Highlights what to look for in ratings:
A++, A+ (Superior) – These companies have impeccable risk management, cash reserves, diverse revenue streams, and long track records that cement rock solid operations. Going with A++ insurers provides optimal security.
A, A- (Excellent) – Still extremely reliable. Conservatively managed with very strong financials but may be slightly more affected by unexpected market fluctuations than A++ carriers.
B++, B+ (Good) – Satisfactory but more vulnerable to downturns. Relatively stable with good claims payment history but less buffer if disaster struck than an “A” rated company.
B, B- (Adequate) – Operate acceptably overall but weak spots in financials or claims payments process increase uncertainty. Risk still rather low but higher than better capitalized companies.
C++, C+ (Vulnerable) – Missing capital benchmarks relative to obligations. Unfavorable underwriting practices also strain. Potential struggles ahead. Better options likely exist.
Using established life insurance carriers with A ratings or higher gives you confidence claims get paid promptly when family depended on it most.
Frequently Asked Questions
Should I buy life insurance through my employer or independently?
Many employers offer group life insurance plans as an employee benefit. These plans provide affordable, basic coverage requiring no health exams for qualification. However, employer plans often have limited portability if you leave your job. Going through an independent insurer allows you to take the policy with you for life and buy higher benefit amounts. Using employers plans to supplement privately purchased coverage can make solid financial sense.
How long should my life insurance coverage last?
We generally recommend maintaining some life insurance coverage throughout adulthood until at least age 70. Term life plans provide low cost protection for temporary needs like covering a mortgage, funding kids educations, or replacing income during peak family financial obligations. Transitioning at least part of your coverage to permanent insurance coverage with cash value later in life builds long term value.
What medical tests are required when applying?
Requirements vary greatly by insurer, coverage amount, age of applicants, and other eligibility factors. Simplified issue policies aimed at seniors may only require basic health questionnaires. By contrast, younger applicants seeking large coverage amounts will go through extensive evaluations like doctor exams, blood/urine tests, cholesterol panels, heart health checks and more. Working with an independent broker simplifies underwriting processes greatly.
Can I get life insurance with pre-existing health conditions?
Yes, life insurance is available even with serious pre-existing conditions like heart disease, cancer, diabetes, stroke history, asthma, and many other diagnoses through specialty “high risk pools” operated by insurers. Approval odds go down and premiums rise the more severe your health history. However, conditions that are well controlled like managed heart disease, early stage cancer, etc. can still qualify for reasonable rates. Explore guaranteed issue or final expense policies if health is poor.
Final Thoughts
I hope this guide covered all the key considerations around shopping for the right life insurance. Finding an affordable policy that balances your budget, risk factors, and financial goals takes diligent research across insurers. Be sure to secure quotes from at least five highly rated companies before deciding. This ensures you find optimal pricing for the precise coverage amount and type matching your family’s needs.