How to compare life insurance quotes

How to compare life insurance quotes

When doing a life insurance comparison of quotes online, by phone or through an agency or broker, it's important to consider a few key steps. Here’s how to keep things clear and to help steer you towards finding the best policy for your needs:

• Know what you need first: Are you looking for term life insurance that covers you for a specific number of years, or do you need permanent coverage that can last your entire life and builds cash value? Make sure the quotes you’re comparing are for the same type of policy with similar coverage amounts and term lengths. Otherwise, the price differences won’t mean much.
• Get quotes from multiple companies: Prices can vary a lot between insurers because they each have their own way of assessing risk. Gather quotes from several reputable companies, and don’t forget to check their financial strength ratings and customer satisfaction (look at AM Best and J.D. Power, for example) to make sure they’re solid enough to be around for the long term.
• Dig into the details: The premium is just one piece of the puzzle. Look at the death benefit, any built-in features and optional riders that might be included. For example, when getting term life quotes, double-check that the term length matches across the board. If you’re looking at permanent life insurance, see whether it’s whole life (with fixed premiums and guaranteed growth) or something more flexible like indexed universal life, which can fluctuate with the market.
• Check the application process: Some policies require a medical exam, while others don’t. If one quote is significantly cheaper, make sure it’s not because of stripped-down coverage or easier underwriting requirements. Sometimes, paying a little more could get you a lot more protection.
• Talk to an expert: If all the options start blending together, a licensed agent or broker can help you sort things out. They can help explain the jargon, break down the pros and cons and maybe even help you find hidden discounts.

Types of life insurance policies

When it comes to life insurance, it’s important to compare apples to apples and not apples to oranges. A term life quote and a whole life quote might both be for life insurance, but they’re completely different products with different purposes, costs and benefits. Here’s a breakdown of the main policy types and what to watch for when you’re comparing quotes.

Term life insurance

Term life insurance covers you for a set period — usually 10, 20 or 30 years. It’s pretty straightforward: you pay a premium, and if something happens to you during that time, your beneficiaries get a payout. There’s no cash value, which is one reason why it’s often much more affordable than permanent life insurance.

What to look for when comparing quotes:

• Match the term length and coverage: A 20-year, $500,000 policy is going to cost more than a 10-year, $250,000 policy, so make sure you’re comparing similar options.
• Check the renewal terms: Some policies let you renew after the term ends, but be ready for a potential price jump.
• Conversion options: Some term policies can be converted to permanent coverage down the road, which could be a difference maker if your needs change.

Permanent life insurance

Permanent life insurance lasts your whole life (up to a coverage age range of 95 to 121) as long as you keep your policy in good standing. Most permanent policies also build cash value over time, which you can borrow against to use while you’re still alive.

Here’s where it gets a little more complex because there are a few different types:

Whole life insurance

• What it offers: Whole life features fixed premiums, guaranteed death benefits and cash value that grows at a steady rate.
• What to compare: Look at things like dividend options (if it’s a participating policy), loan interest rates and how fast the cash value can grow, which can be shown on an illustration — ask an agent for one.

Universal life insurance (UL)

• What it offers: Universal life offers flexible premiums and adjustable death benefits, with cash value growth tied to interest rates set by the insurer.
• What to compare: Check out the current interest rate, the minimum guaranteed rate and how flexible the premium payments are. An illustration can be helpful.

Indexed universal life insurance (IUL)

• What it offers: Similar to UL, but an indexed universal policy’s cash value growth is linked to a stock market index (like the S&P 500), with limits on how much you can gain or lose.
• What to compare: Look at the participation rates, caps and floors and how the interest is credited. Seek an illustration.

Variable life insurance

• What it offers: Variable life lets you invest the cash value in sub-accounts, kind of like mutual funds. It has more growth potential — but also more risk.
• What to compare: Review the investment options, fees and the performance history of the funds. Ask for an illustration.

Final expense life insurance

This type of policy is designed to cover end-of-life expenses, like funeral costs. It’s usually for smaller amounts and may not require a medical exam.

• Match coverage amounts: These policies typically range from $5,000 to $25,000, so make sure you’re comparing similar amounts.
• Consider the underwriting: Some policies are guaranteed acceptance, which sounds great, but they might have a waiting period before the full benefits kick in.

What health and lifestyle factors affect my life insurance quotes?

Life insurance quotes consider multiple aspects of your life to determine your rate. Age is one of the biggest factors, with life insurance generally being more expensive for seniors due to the higher likelihood of an older insured passing away earlier in the policy period. Here are some other lifestyle factors that can affect your life insurance quotes and rates:

Tobacco use

If you smoke or use chewing tobacco, your life insurance may cost more than it would for a non-smoker. Smoking increases the risk of mortality, leading insurance companies to charge higher premiums for coverage.

Health conditions

Major health conditions can result in higher policy costs. Pre-existing conditions such as high blood pressure, cancer, heart disease, diabetes, lung disease and liver cirrhosis may lead to more expensive premiums. If you are a particularly high-risk applicant, you might consider no-medical-exam coverage, though these policies are generally more expensive.

Prescriptions

A major health condition might not affect eligibility or premiums as significantly if it is well managed with medications. When applying for a policy, have a complete list of your medications, including dosages, frequency of use and duration. The insurance company will likely need this information.

Family medical history

Insurers often want to know about your family's medical history. A family history of heart disease, high cholesterol or other hereditary health conditions could increase your premiums, as it may be more likely that you will develop these conditions.

Hobbies

Engaging in high-risk hobbies such as skydiving, scuba diving or rock climbing can increase your life insurance rates. These activities inherently increase the likelihood of you experiencing harm or injuries, making the insurer more likely to charge more for coverage.

Occupations

Certain occupations are considered riskier than others. Jobs such as construction workers, pilots or race car drivers involve higher risks, which can lead to higher life insurance premiums.

Alcohol and drug use

Excessive alcohol consumption or drug use can significantly affect your life insurance rates. Insurers also view these behaviors as high-risk, which can result in higher premiums or even denial of coverage.

What type of life insurance policy is right for you?

Before shopping for the best life insurance policy, consider what type of financial need you want the policy to cover. 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.

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.

Frequently asked questions