How Much Life Insurance Do I Need?

Contributor, Benzinga

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There are hundreds of different types of insurance in the world today. Ask any insurance agent, and they will tell you that life insurance is the most overlooked one of them all. What makes this so odd, life insurance is the most important one of them all.

Life insurance itself is hundreds of years old. Its design is simple. An insured (policyholder) pays an insurer (the insurance company) a dollar amount called premium.

In return, an insurer will promise to pay funds (a death benefit) to any person of your choosing (a beneficiary), as long as their name is on your policy before you pass away. As long as premiums are still being paid, the insurance company is obligated to pay a beneficiary a death benefit.

Who Needs Life Insurance?

Everyone, no matter their age can benefit from a life insurance policy. However, the people that mostly buy it have families that they need to make sure are financially stable, even if they were to die.

Who is Life Insurance Best Suited For?

When insurance first hit the market hundreds of years ago, there were little to no rules. So, criminals would take life insurance policies out on, let’s say their neighbor, with, or without the neighbor even knowing. The criminal would then kill the neighbor, and collect the life insurance check.

Needless to say, insurance carriers figured this out real fast and adopted a key rule called insurable interest (some related to you, even a spouse). Today, it is not possible to take out a life insurance policy on someone who you do not have an insurable interest on.

People who you can take out a life insurance on are as follows:

  • A spouse
  • A child
  • A parent
  • A grandchild
  • A sibling
  • An aunt or uncle

When Is the Best Time To Purchase Life Insurance?

The best time to purchase life insurance is when you find yourself responsible for the well-being of other family members, or a spouse. This is especially true if you are the breadwinner. In the event of your sudden death, your spouse and child can no longer afford the way of life they were accustomed to when you were alive.

Can You Buy Life Insurance for Someone Who is Dying?

This depends on your insurability, but sadly, you cannot often buy life insurance for someone who is terminally ill. Your insurability depends on factors such as your health and lifestyle.

That being said, there are certain ways that you could be eligible for life insurance. Some providers may offer certain types of policies or riders that allow you to qualify for coverage. Some may not require a medical exam — although it is likely they will still ask you about your health, and it’s important to be truthful, so not having to submit to a medical exam doesn’t guarantee coverage. Or, you may be eligible through your employer, regardless of your health.

All in all, it’s best to avoid this situation by getting life insurance well before you think you may need it.

Best Place to Get Life Insurance Quotes

If you want to compare quotes side-by-side, Policygenius is your best bet for life insurance quotes.

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+ 10 of the nation’s best

Types Of Life Insurance

Life insurance has two main types; whole life and term life insurance. Each still pays a death benefit, however, how long they last are vastly different.

  • Whole Life – Whole life is just how it sounds. As long as you keep paying your premiums, the policy will keep covering you until your last day.
  • Term Life – This policy only provides life insurance for a very specific amount of time. The time frames are usually in amounts of 10, 20, and 30-year policies.

Compare Life Insurance Carriers

Get started securely through Bestow Life Insurance’s website
Disclosure: *excludes New York
Age Requirements
18-59
N/A
1 Minute Review

Bestow offers 2 kinds of life insurance policies: 20-year level term policy or a 10-year level term policy.

Through its policies, you may qualify for up to $1 million in term life insurance. That may seem like a sizeable sum, but if you have a spouse and children, you have to consider the cost of things beyond your mortgage, such as daycare and eventually college, as well as the loss of wages over time.

Bestow uses its proprietary technology to underwrite your insurance policy, so the application process is much faster than with traditional life insurance companies. They’re also backed by Munich Re and North American Company for Life and Health Insurance, 2 A+ rated insurance companies.

Best For
  • People who are looking for short-term life insurance
  • Individuals who don’t want to go through the hassle of having a medical exam or blood work done to get coverage
Pros
  • Plans start at just $8/month
  • Decent coverage options if you need insurance quickly and without hassle
Cons
  • Offers 2 types of plans; does not offer whole or universal life insurance policies
  • The 10- and 20-year plans not available to users under 21 or older than 55
Age Requirements
18 – 100
N/A
1 Minute Review

Northwestern Mutual offers a variety of life insurance policies that are suitable for a wide range of people. Policies are available in all 50 states, although some policies and riders may not be available in every state. The company has strong financial strength ratings and an above-average rating when it comes to consumer complaints. 

To get a quote from Northwestern Mutual, you have to talk to one of its agents. However, you can browse information on its website and use the coverage calculator tool to estimate how much life insurance coverage is recommended for your family.

Best For
  • Affordable term life insurance that can be converted to a permanent life insurance policy later
  • Adding riders to a life insurance policy
Pros
  • Strong financial strength ratings and a low number of consumer complaints
  • Several types of life insurance policies available
  • Offers other financial planning, insurance and investment products and services
Cons
  • Lack of clarity about the product offerings on Northwestern Mutual’s website
  • Can’t get a quote or apply directly for a policy online
get started securely through Fabric Life Insurance’s website
Age Requirements
21 – 60
N/A
1 Minute Review

Fabric offers term life insurance, free digital will creation and other tools to help you better your family’s financial life. They’re the one stop shop for young families looking for financial security.

Fabric offers 10, 15, 20, 25 and 30 year term options and coverage ranging from $100,000 to $5 million.

Fabric offers highly reviewed online customer service through its app and website and has the highest TrustPilot rating in its class.

Best For
  • No exam required for most
  • Those who want to avoid the hassle of insurance salesmen
  • New or expecting parents looking for a broader suite of financial tools
Pros
  • Affordable premiums
  • Free digital will creation
  • Free app with helpful tools for parents
  • Apply and see your rate in less than 10 minutes
Cons
  • No term life coverage in New York or Montana
  • Can’t increase coverage after purchasing
Age Requirements
18 – 80
N/A
1 Minute Review

With more than 12 million active customers, Transamerica Corp. is one of the biggest names in the life insurance industry. Transamerica offers a wide array of life insurance products — everything from term to a variety of permanent life insurance products, including whole, universal and variable life.

Transamerica life insurance policies are available to anyone ages 18 to 80, with coverage starting at just $25,000 and going as high as $10 million. In addition to term and permanent life insurance policies, Transamerica offers final expense insurance and any number of riders to help customers customize their policies.

Best For
  • Coverage with chronic conditions
  • High benefit policies
  • Smokers
Pros
  • Term life policy quotes and purchase available online
  • Wide array of products
  • Comprehensive online resources
  • No medical exam required for many term policies
Cons
  • Below-average scores from the National Association of Insurance Commissioners (NAIC) and J.D. Powers
  • Policies purchased through agents only
  • Disproportionate number of customer complaints
get started securely through Ladder’s website
Disclosure: Ladder Insurance Services, LLC (Cal. license # 0K22568; Ark. license # 3000140372) offers term life insurance policies: (i) in New York, on behalf of Allianz Life Insurance Company of New York, New York, NY (policy form # MN-26); and (ii) in all other states and the District of Columbia on behalf of Allianz Life Insurance Company of North America, Minneapolis, MN (policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to issue life insurance in the state of New York. Insurance policy prices, coverages, features, terms, benefits, exclusions, limitations and available discounts vary among these insurers and are subject to qualifications. Each insurer is solely responsible for any claims and has financial responsibility for its own products.
Age Requirements
20 – 60
N/A
1 Minute Review

Ladder offers policies with no hidden fees, on-the-spot underwriting and a streamlined website. Coverage ranges from $100,000 to $8 million and you can adjust your coverage over time as needs change.

You can choose a 10, 15, 20, 25, or 30-year term. Ladder also offers up to $3 million in coverage without a medical exam — just answer a few health questions and complete the application to get an instant decision.

Ladder doesn’t impose policy, cancellation or processing fees and you can cancel at any time. Take three steps to get Ladder insurance:

  1. You can apply for life insurance coverage with Ladder right now via the online application.
  2. Find out whether you’re instantly approved.
  3. Accept your offer — including affordable prices and no hidden fees.

Its price lock guarantee ensures your premium won’t increase as your health changes and you age. Policies in New York are issued by Allianz Life Insurance Company of New York and in the other states and DC by Allianz Life Insurance Company of North America. You can receive a refund within the 1st 30 days if you’re unhappy with your coverage and you can cancel at any time.

 

Best For
  • Term life insurance
  • Online application
  • Policyholders between 20 to 60 years of age
Pros
  • Up to $8 million in coverage
  • Price lock guarantee
  • No policy fees
  • 30-day money-back guarantee
  • Adjustable coverage
Cons
  • No policy riders
  • Term life insurance only

Next Steps

Get at least three life insurance quotes before deciding on a policy. Do research on the companies in question. Term life policies are always cheaper than whole life policies. Whole life policies gain a cash value, and a loan can be borrowed from them at certain points.

Methodology

Benzinga crafted a specific methodology to rank life insurance. To see a comprehensive breakdown of our methodology, please visit our Life Insurance Methodology page.