Key Takeaways

  • When buying life insurance, figure out how much your beneficiaries would need and what type of life insurance works best for you.
  • The best life insurance company for you depends on what you want out of a life policy.
  • Life insurance policy costs vary based on many factors, including age, health and gender.

Life insurance is a great way to safeguard your loved ones’ financial future if the unthinkable happens.

The good news is that buying life insurance has gotten easier thanks to online life insurance and faster approval processes. You can also purchase life insurance through an agent or broker. The life insurance buying process isn’t as complicated as you may think.

Learn how to buy life insurance, how much life insurance you may need, what’s involved, and how to compare life insurance quotes. By performing your due diligence, you can likely save money on premiums and ensure a safety net for your beneficiaries to give you priceless peace of mind.

How to buy life insurance

There are a few ways to get a life insurance policy:

  • Request life insurance quotes directly from a life insurance company’s website
  • Get life insurance quotes from an online quote aggregator site, which lets you compare multiple insurer’s rates
  • Contact a life insurance agent in your area

Going online is the easiest way to get life insurance quotes. You can do it all from home at your convenience. However, some people would rather meet with an agent in their area.

“Nothing beats a trusted insurance agent whom you already have a relationship with. Ask what life insurance options they have available,” suggests Jonathan Voegele, agency vice president for the Central Region of COUNTRY Financial in Bloomington, Illinois.

When you start looking for a life insurance policy, you should also talk to trusted friends and family to see which life insurer insures them.

“Receiving a recommendation from a friend or family member for an agent or advisor you have used is often a great and safe way to purchase a life insurance policy,” says John Buenger, senior financial manager and advisor at the Rice Agency in Hagerstown, Maryland.

That doesn’t mean you should always go along with your friends’ or family’s insurance company. Dig deeper and find out more about the company and its life insurance policy options and coverage levels before deciding on an insurer.

Know the type of life insurance you need

There are two major types of life insurance: term and permanent life (which includes whole life insurance). Knowing which type is best for your needs is the first step in the insurance selection process.

One thing that they share is they both pay out a death benefit to beneficiaries, usually in a lump sum.

Term life insurance

Term life insurance are policies with a set number of years, such as 20 or 30 years. If you outlive your policy, your loved ones don’t get a death benefit when you die.

“Term insurance pays only if death occurs during the term of the policy, which is usually from one to 30 years,” says Mark Friedlander, director of Corporate Communications for the Insurance Information Institute in St. Johns, Florida.

With term insurance, you can choose either:

  • Level term — The death benefit stays the same throughout the period of time
  • Decreasing term — The death benefit drops, usually in one-year increments, over the course of your policy’s term.

Permanent life insurance

The other overarching type of life insurance is permanent life. A permanent life insurance policy pays a death benefit when the policyholder dies as long as regular premium payments were made. Unlike term life, there is no time period to worry about with a permanent policy.

Four types of permanent life insurance are:

Traditional whole life

The death benefit and the premium stay the same throughout the life of the policy. Whole life, and other types of permanent life insurance, offer cash value, which sets aside part of the premiums paid and lets you tap into the life insurance policy while you’re alive.

Universal life

Universal life has a cash value account that generally earns a money market rate of interest. After you accumulate enough money in your policy’s cash value, you can alter premium payments — as long as there’s enough money in the account to cover the costs.

Variable life

Variable life combines death protection with a savings account that can be invested in stocks, bonds, and money market mutual funds. The value of the policy may increase more quickly depending on the investments, but that comes with more risk. If your investments don’t perform well, the death benefit and cash value may decrease. That said, some policies guarantee the death benefit won’t fall below a minimum threshold.

Variable universal life

Variable universal policies have the investment risk and reward characteristics of variable life insurance. That’s coupled with the ability to adjust your premiums and death benefit.

Decide how much coverage you need

To help determine how much coverage is right for you, think about the financial needs your beneficiaries will have if you pass away, including:

  • Mortgage
  • Future education costs
  • Loans
  • Credit card debt
  • Child care
  • Funeral expenses

Buenger says a good rule of thumb to follow is to purchase life insurance that will pay out seven to 10 times your annual income in death benefits.

“An applicant earning $100,000 annually should probably purchase between $750,000 to $1 million in life insurance death benefits,” he says. “This death benefit should be large enough to cover 100 percent of your final expenses and funeral costs, pay off debt that includes any outstanding mortgage balance, automobile loans, credit card debt, and student/education loans, and cover your loss of income for a significant number of years.”

Manny Lirio, head of marketing for Windsor, Connecticut-headquartered Vantis Life Insurance Company, says it’s also crucial to consider your investments and liquid money that can be turned into cash within three months.

“The difference between your total expenses and total worth can help ensure that you are buying the right amount of coverage and not overinsuring yourself,” says Lirio.

Let our life insurance calculator help you figure out how much life insurance you need.

Get estimates for life insurance costs

Whether you request a life insurance quote online, over the phone, or in person, you can expect the process to be relatively short. You will be asked a series of brief questions related to your health, occupation, financial assets, and more.

After receiving a quote online or from an insurance agent, the next step is to complete a proper application.

“The time involved will depend on the type of policy you choose. Applications for simplified life insurance policies take roughly 30 minutes and can usually be completed over the phone or online,” says Jake Irving, owner of Willamette Life Insurance in Beaverton, Oregon. “Once approved, your policy is often issued within a few days and will be put into effect upon the insurance company receiving your first payment.”

Premium costs vary based on many factors, including age, health and gender. Unlike other types of insurance, life insurance doesn’t consider your ZIP code when setting premiums.

Average life insurance costs

Let’s look at the average annual term life insurance rates for nonsmokers considered “premium plus” health, which is the healthiest designation, for 10-, 20- and 30-year term policies.

Age and gender 10-year policy 20-year policy 30-year policy
20-year-old female$172$221$289
20-year-old male$205$263$361
25-year-old female$173$222$293
25-year-old male$202$261$362
30-year-old female$177$234$320
30-year-old male$204$271$387
35-year-old female$188$264$365
35-year-old male$213$300$438
40-year-old female$234$341$497
40-year-old male$269$402$621

Source: CompuLife, rates for September 2020.

Choose the best life insurance company for your needs

The right life insurance company depends on your situation.

Our Best Life Insurance Companies, which rates insurers based on our consumer survey, is a good place to start. Here are Insure.com’s Best Life Insurance Companies:

  1. AAA Life Insurance Company, which offers term, whole, and universal life policies. It ranked best in multiple categories: price and customer service. The company also has the highest percentage of members who said they recommend the company (91%).
  2. American General (AIG), which ranked highest for website/app and placed in the top three for price and customer service. Millennials rated the company first overall and for price, customer service, and website/app.
  3. Prudential, which offers term, universal, indexed universal, and variable universal life insurance, ranked highest for price and customer service (second and fifth place, respectively).
  4. New York Life Insurance
  5. Allstate
  6. Globe Life Insurance
  7. John Hancock Life
  8. Northwestern Mutual
  9. State Farm
  10. Mutual of Omaha

What documents you need to buy life insurance

Several things are required to complete a life insurance application. Be sure to gather the following before applying:

  • Name, address, phone number, and date of birth
  • State/country of birth
  • Citizenship, gender, and marital status
  • Occupational status, including details of your job responsibilities and salary
  • Net worth
  • Driver’s license number
  • Social Security number
  • Health history information and physician contact information
  • Credit card or bank information for payment (when you are ready to purchase)

“Be as honest as possible during the application process. Most insurance companies have ways of finding out medical backgrounds. If their search does not match up with what you indicated in the application, your policy may get denied,” recommends Voegele.

How to compare life insurance quotes

Gather at least a few quotes from different life insurers so that you can make an apples-to-apples comparison.

To help narrow down the right policy, company, and price for you, Friedlander advises following these criteria:

  • Product: Choose a company that offers the policy and features that meet your needs.
  • Company identity: Make sure you know the full name, home office location, and affiliation — if any — of any insurer you consider.
  • Financial strength: “Life insurance is a long-term arrangement. There is no guarantee for life insurance policyholders similar to that provided for bank accounts by the Federal Deposit Insurance Corporation. So select a company that is likely to be financially sound for many years by using ratings from independent rating agencies, such as A.M. Best, Fitch, Moody’s, and Standard & Poor’s,” he says.
  • Market ethics: Find out if the company abides by the principles and codes of conduct of the Insurance Marketplace Standards Association.
  • Advice and service: Try to choose a company with a helpful, responsive, and attentive customer service department.
  • Claims: Check a national claims database to see what complaint information it has on a company. Visit the Better Business Bureau ratings page for the insurer. “Also, your state insurance department will be able to tell you if the company you are considering doing business with has had many consumer complaints,” Friedlander adds.
  • Cost: Realize that premiums can vary widely among companies.

How to buy life insurance online

Life insurers often allow you to buy coverage online. There are several reasons for buying insurance online.

“You have the possibility of instant approval and getting your policy approved in as little as 10 minutes, as opposed to the old style of application approval taking four to six weeks. If you are not instantly approved, you are still in an accelerated underwriting process in which approvals take generally less than two weeks,” said Shauna Visconti, sales director and life insurance agent at Leap Life.

The Internet also lets you shop and compare policies easier. You don’t have to meet with an insurance agent and compare multiple options.

“The Internet is helping democratize financial literacy in a vital way,” said Matt Myers from Haven Life Insurance Agency, an online life insurance agency. “Increasingly, we are all getting access to the information and tools necessary to educate ourselves, save more, invest wisely and purchase the right products to protect our families and wealth. For people who prefer doing research themselves and managing their finances in a self-directed way, applying for and buying life insurance online is simple, transparent and incredibly convenient.”

Process of buying life insurance online

The online process is easier. The applicant supplies basic information like:

  • Age
  • Occupation
  • Health
  • Personal and family health history

The insurer then reviews the application, often in real-time, and gives back an instant decision on eligibility.

“If approved, you can start coverage that day,” said Myers, adding that the person may need to take a medical exam to finalize pricing and coverage.

Not everyone is eligible to get life insurance online, though. People with pre-existing conditions may not qualify for online life insurance. Instead, an insurer will want more health information about you and request a medical exam.

Buying life insurance online is a quick way to get insured. Answering a handful of questions could result in you getting covered almost immediately.

Frequently Asked Questions

Which is the best life insurance company?

The best life insurance company for you is one that offers a policy that caters to your unique needs, not just one that quotes the lowest price. It pays to shop around among different carriers and research them carefully before making a decision — whether you’re looking for the most affordable or most comprehensive life policies.

To help guide your choice, check out Insure.com’s list of the Best Life Insurance Companies for 2021. The top three ranked companies currently are AAA Life Insurance Company, American General (AIG), and Prudential.

Why should I buy my own life insurance?

Life insurance can help your long-term financial strategy and offer protection for your loved ones. Also, life insurance provides income replacement if you were to die.

If you were to die, your family would be burdened not only with grief but potentially a mortgage, education costs, credit cards bill and other loans. Your loved ones won’t have you there to help pay those bills. So, you may find you need life insurance to offer you peace of mind and provide for your beneficiaries.

Buying life insurance for yourself can set into place a safety net for your loved ones if the unthinkable happens.

How can I buy life insurance for my parents?

Anyone with an insurable interest can create and purchase a policy for someone else, including their parents or grandparents.

However, Jake Irving with Willamette Life Insurance cautions that the person being insured needs to be involved in the process.

“The proposed insured needs to consent to the policy, sign their name, and be mentally coherent and legally able to enter into a contract,” he says. “To get the most accurate quote possible for a parent’s policy, gather ahead of time this person’s height and weight, health history, list of prescriptions, desired coverage, phone number, address, date of birth, beneficiary name, Social Security number, and payment information.”