Get an online life insurance quote today from multiple life insurance companies, all in one place.
Life insurance isn’t the most pleasant topic to think about — but when you die, your family might be relieved you signed up for a policy.
- What is life insurance?
- Types of life insurance
- Who needs life insurance?
- How to buy life insurance
Amid the COVID-19 pandemic, not all companies are accepting new life insurance applications. For the latest information on how to cope with financial stress during this emergency, see NerdWallet’s financial guide to COVID-19.
What is life insurance?
A life insurance policy is a contract with an insurance company. In exchange for regular premiums you pay over time, life insurance pays out after your death to the people you designate as beneficiaries — usually children, a spouse or other family members. It’s an important safety net if anyone depends on you financially. The life insurance payout can pay debts such as a mortgage, replace your income and provide college tuition funds.
Types of life insurance
Term life insurance covers a limited time period, such as 10, 20 or 30 years, and does not build cash value. If you die within the term, your beneficiaries receive the payout.
Permanent life insurance costs more than term but offers additional features like cash value that you can borrow against and grows over time. Whole life is the best-known form of permanent life insurance. Other types include universal, variable and variable universal.
COMPARISON OF TYPES OF LIFE INSURANCE
|Feature||Term life||Whole life||Universal life*|
|Choices in policy length||✓|
|Builds cash value||✓||✓|
|Premium payments may be flexible||✓|
|Death benefit amount may be flexible||✓|
|Most affordable way to buy life insurance||✓|
|Cash value usually can be linked to investments||✓|
|*Details regarding premium flexibility and death benefit flexibility vary for universal life policies.|
Who needs life insurance?
NerdWallet recommends life insurance for anyone who has loved ones who depend on them financially. This includes parents, homeowners with a mortgage, business owners and others.
For many people the best option is term life insurance, which lasts for a limited time. Others may need permanent insurance, which does not expire as long as premiums are paid.
|How life insurance can help||Best option|
|Life insurance can help replace your lost income so your family can continue to pay for everyday expenses.||Term life insurance can cover your working years.|
|Life insurance would cover the cost of paying for services the parent does for free, such as child care.||Term life can cover the years your kids are young.|
|A policy could cover the support payments that a divorced parent makes.||Term life can cover the years of support payments.|
|Parent of a special-needs child|
|Life insurance can make sure the child will have financial support after a parent dies.||Permanent life insurance provides a payout no matter when you die.|
|Homeowners with a mortgage|
|A policy can cover mortgage payments, so your family doesn’t have to move.||Term life insurance can match the years of a mortgage.|
|Someone with co-signed debt (such as student loans or credit cards)|
|Life insurance could cover the cost of the debt.||Term life can be timed to end with the debt payments.|
|High net worth individual|
|Life insurance can provide funds for heirs to pay estate or inheritance taxes.||Permanent life insurance is best for those with estate tax concerns.|
|Someone who wants to provide an inheritance|
|If you don’t have a lot of wealth, life insurance can provide a small inheritance to heirs.||Permanent life insurance will pay money for the inheritance, no matter when you die.|
|Life insurance can pay off business debts, help heirs to the business pay off estate taxes, or fund a buy-sell agreement that allows a business partner to buy out your share.||Term life or permanent life, depending on the issue to be solved.|
|Investor who has maxed out other retirement plans|
|Life insurance with a cash value component can provide a supplemental source of retirement savings.||Permanent life insurance, which builds cash value that you can access.|
|People concerned about paying for their own funerals|
|Small life insurance policies can pay for your funeral and final expenses.||Permanent life, such as final expense insurance.|
Term life is sufficient for most families. It costs less than whole life, and you can choose a term that matches the years when people depend on you financially. By the time the term ends, you may no longer need life insurance: Your house will be paid down, your kids will be grown, and you’ll have some money in the bank.
However, whole life insurance and other forms of permanent coverage can be useful in some situations.
|Choose term life if you:||Choose whole life if you:|
|Only need life insurance to replace your income over a certain period, such as the years you’re raising children or paying off your mortgage.Want the most affordable coverage.Think you might want permanent life insurance but can’t afford it. Most term life policies are convertible to permanent coverage. The deadline for conversion varies by policy.||Want to provide money for your heirs to pay estate taxes. In 2020, estates worth more than $11.58 million per individual or $23.16 million per couple are subject to federal estate taxes. State estate taxes vary. Here’s a map of state estate and inheritance taxes from the Tax Foundation.Have heirs who might be forced to sell off parts of your estate to pay the tax bill without an insurance payout.Have a lifelong dependent, such as a child with special needs. Life insurance can fund a special needs trust to provide care for your child after you’re gone. Consult with an attorney and financial advisor if you want to set up a trust.Want to spend your retirement savings and still leave an inheritance or money for final expenses, such as funeral costs.Want to equalize inheritances. If you plan to leave a business or property to one child, whole life insurance could compensate your other children.|
How to buy life insurance
Life insurance isn’t a purchase you make often, so you may not know where to start or how to get life insurance quotes. Here’s how to get the coverage you need.
Determine how much life insurance you need
The amount of life insurance you need depends on your family’s needs and priorities. Do you have debts to pay? Will your family need to replace your income to meet everyday living expenses? Do you want to fund a college education for your children?
Although you may have some life insurance through your job, it’s generally a good idea to have your own policy in addition to the coverage provided by your employer. The policy through your employer is likely not enough to meet your family’s financial needs and typically ends if you leave the job.
Debt and income replacement calculators can help you decide how much coverage you need before you get life insurance quotes. Here’s a calculator to get you started. You can find more here: How much life insurance do I need?
How much life insurance do I need?
First, let’s confirm that life insurance is appropriate for you.Does anyone depend on you financially??Select oneYesNo
Evaluate life insurance companies
Life insurance is a long-term purchase, and you want a company that can pay claims many years in the future. The biggest life insurance companies have long track records, but some smaller insurers are solid contenders as well. Check out insurers’ financial strength through ratings agencies such as A.M. Best or Standard & Poor’s. NerdWallet recommends avoiding insurers with an A.M. Best rating of B or lower, if possible.
NerdWallet’s ranking of the best life insurance companies also gives points to companies that have higher customer satisfaction scores and fewer complaints to state regulators.
Not all companies sell the same types of policies, and some focus on certain types, such as life insurance policies for children. Narrow your choices by knowing generally the type of coverage you want before you begin comparing life insurance quotes.
Gather info you need
When you apply for life insurance, you’ll need to have a few documents on hand. You’ll likely need to provide information about your current and past health conditions and your family health history. The insurer may need your consent to get medical records and ask you to take a life insurance medical exam. Insurers also check other data sources to determine term life insurance quotes, such as MIB Group, which collects data on medical conditions, your driving record and hazardous hobbies.
You’ll need to choose beneficiaries, who will receive the payout when you die. Be sure you have their Social Security numbers and dates of birth.
You also may have to answer questions about criminal convictions and driving violations such as a suspended driver’s license or DUI, particularly if they happened within the past few years.
» MORE: What you need to apply for term life insurance
Compare life insurance quotes
The best way to save on life insurance is to compare all your options. To be sure you find the best rate for you, compare life insurance quotes from several companies. Prices can vary widely, depending on the type of coverage you choose and personal factors such as your age, gender and health.
To give you a rough idea of what to expect, here’s a look at average annual life insurance rates for men and women at different ages and for different policy lengths.
2020 average life insurance rates
|Person covered||Policy amount||Whole life||30-year term life||20-year term life|
|Male, age 30||$250,000||$2,145||$223||$150|
|Male, age 40||$250,000||$3,191||$340||$210|
|Male, age 50||$250,000||$4,990||$811||$465|
|Annual premiums using an average of three lowest prices available in each category for healthy men and women. Source: Quotacy.|
» MORE: 5 clever hacks for buying life insurance Back to top
If you can, apply when you’re healthy
Life insurance companies use life expectancy as the basis for determining rates. Anything that could shorten your life expectancy could lead to a higher price. Your age, gender, medical conditions and family’s health history are all taken into consideration.
So it’s smart to buy life insurance as early as possible, when you’re young and healthy. If you wait, your life insurance quotes will increase solely because of your age. If new health problems arise, your rates could go up even more.
But if you already have a health issue, don’t let that stop you from getting life insurance quotes. Insurance companies vary in how they view pre-existing conditions, and some types of life insurance don’t require a medical exam.