How to Buy Life Insurance

Contributor, Benzinga

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Life insurance isn’t much fun to think about, which is one of the reasons over 40% of Americans don’t have any coverage. However, life insurance is a key part of a sound financial plan and protects your family if a caregiver or income provider passes unexpectedly.

There’s no such thing as a one-size-fits-all life insurance policy. The needs of your family may differ from the needs of your neighbors. Read on to learn how to buy life insurance, including an introduction to the different types of coverage and how to choose a coverage amount that’s right for your family’s specific needs.

What is Life Insurance?

In its most basic form, life insurance is income replacement. In fact, that description is the basis of some older rules of thumb for calculating life insurance needs. However, this simpler definition overlooks some key features of life insurance and can exclude caregivers (who may or may not have an income) from coverage consideration.

Life insurance is a financial planning tool that provides income replacement but that can also provide for new expenses your family might face if a loved one passes. It’s no fun to think about, but the passing of a loved one can change everything in an instant. Income is only one consideration.

What to Consider Before You Get a Life Insurance Policy

In addition to becoming familiar with life insurance costs and payouts, it’s important to understand the common types of life insurance policies before you make a purchase. Life insurance has two primary categories: term life insurance and permanent life insurance.

Both term life and permanent life insurance have multiple categories within them, including variations that may bring more flexibility or more value. While this can seem to add to the confusion, for many households, having just one life insurance policy might not be the best solution. It may be that a combination of policy types is needed to meet both long-term and short term needs.

Term Life Insurance

If your goal is to buy a simple life insurance policy that protects your family for a limited amount of time, term life insurance may be the answer. The term refers to the amount of time the policy requires guaranteed premiums and can range from five to 30 years. Term life insurance is often used when there is a financial obligation that has an expiration date.

Loans, like 30-year mortgages, are a common example. Another example is starting a family. Raising a child is an ongoing financial commitment that may last up to two decades.

The goal of buying term life insurance is to provide a way to continue paying for your financial commitments. Without life insurance, your surviving family may be forced into some difficult financial decisions, perhaps putting your home at risk or sidelining college plans.

A 20-year term policy is the most popular type of term policy, as it strikes a balance because it’s long enough to cover most obligations and is still affordable. You’ll also find some other types of term policies available:

Permanent Life Insurance

The alternative to term life insurance is permanent life insurance, which also comes in several types. Rather than address a limited time frame, permanent life insurance is designed to last a lifetime. However, there are different ways of reaching that goal, depending on the type of permanent life insurance you choose.

Whole Life Insurance

Whole life insurance is what most people think of when they think of permanent life insurance. The policy has both a savings component and a death benefit.

This type of policy builds cash value over time, and the policy can be borrowed against or even sold. Another type of life insurance for seniors over 50 is a final expense insurance policy, which is a whole life insurance policy with simplified underwriting and a limited death benefit designed to pay for final expenses — but not much more due to the limited coverage amount.

Who Needs Life Insurance Coverage?

A common perception is that you only need life insurance coverage for the income earner in the household. However, if your household has a stay-at-home parent with limited income or perhaps no income at all, consider buying life insurance for them as well. It’s too easy to overlook the value of a stay-home-parent. If you had to replace all the services they provide daily with paid providers, the cost would be staggering for most families.

How Much Life Insurance Do I Need?

There are several rules of thumb commonly used to calculate how much life insurance to buy. Rather than relying on rules of thumb, do the math instead to ensure accuracy. To arrive at a figure, add up your long-term obligations and then subtract your assets — as well as coverage provided by other policies, like a group term life policy you have through work.

Let’s say you want to provide your family with 80% of your $50,000 income for a duration of twenty years, or $40,000 per year. You also have $100,000 in debt, including the cars and mortgage, and you want to provide $50,000 for your children’s education. You expect $10,000 in funeral expenses as well.

$40,000 x 20 = $800,000

$100,000 + $50,000 + $10,000 = $160,000

So far, you’ll need $960,000 in life insurance coverage.

But you also have $150,000 in savings and non-retirement investments as well as a $50,000 life insurance policy through your employer.

Subtract $200,000 from $960,000 to arrive at $760,000 in coverage for your family.

Repeat this math process for each person you’re insuring in your household to determine coverage amount for each. For most families, you’ll need to cover two people.

Life insurance rates go up with each passing year. Waiting until later lead to much higher premiums. Also, there’s a chance of developing a health condition that can affect rates or even make you uninsurable. If you can buy now, don’t wait.

How to Buy Life Insurance

When you’re ready to purchase life insurance, you can use the following steps to get the best deal and purchase a policy that suits your budget and your family’s financial liabilities.

  1. Search for policies that suit your needs. You need life insurance that can pay off your family’s largest debts if you were to pass away. Some people calculate life insurance as a multiple of their annual salary. However, you should consider how much it costs to pay off your house, cars and credit cards or other debts. Work from that number so that your family can be debt-free. If you can afford more coverage, add extra cash that they can use to get back on their feet.
  2. Compare as many policies as possible. Look at all the policies you can find. You will see varying premiums, coverages, additional options and even the opportunity to pay more money into the policy.
  3. Ask your agent if coverage is available shortly after the policy is purchased. In the unfortunate event that you pass away soon after buying your policy, ask your agent if coverage is available.
  4. Decide if you can pay more into the policy. If you can pay more money into the policy, you might decide to invest in universal or whole life insurance that can provide massive returns if you continue investing in the policy.
  5. Check credit and customer service ratings for each carrier. Carriers with poor customer service ratings will not be good to work with. Carriers with low credit ratings tend to charge more because they need extra cash.
  6. Ask your agent to write the policy. Ask your agent to write the policy. Review that policy with them, your payment options and start the policy as soon as possible.
  7. Make sure you know how to pay on the policy. Set up recurring payments so the policy never lapses, and set up your first automatic payment the same day the policy becomes effective.

The Best Life Insurance

Protecting your family doesn’t have to be expensive. It’s never been easier to get a cheap life insurance policy for just a few dollars a month. Start your search with our favorite low-cost life insurance policy providers.

1. Bestow

With plans starting at just $8 a month Bestow is perfect for anyone on a budget. This affordable term life insurance allows you to skip the doctor appointment and say “no thanks” to the stacks of paperwork. You can get a quote quickly and when it’s convenient for you because everything is 100% online. Answer a few simple questions and get a decision instantly.

There is no need to enter your name, email or phone number to get a quote. Bestow relies on data rather than feedback from a medical exam. Take life into your own hands by applying with Bestow, the ideal combination of age-old quality fused with modern technology to deliver one of the best companies on the market.

10 and 20-year policies are available, just another reason why this customizable life insurance makes our top list.

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

2. Haven Life

Haven Life Insurance Agency offers a simple way to obtain term life insurance for those between the ages of 18 and 64. You can choose a term length of 10, 15, 20 or 30-years. What’s unique about this term life insurance is the way you can complete an application online and digitally purchase coverage. Haven Life is an innovative life insurance agency backed and wholly owned by MassMutual, so you have added peace of mind with this insurance start-up. Also available is Haven Life Plus, an additional feature to your term life policy. Some of the great services included with Haven Life Plus are:

  • A world-class fitness app with thousands of workouts and (most importantly) great music
  • An app that combines the latest sleep and neuroscience research to help prevent jet lag
  • A customized, state-specific, legally valid online will

Affordable and dependable, Haven Life offers protection for your family in the event of an unfortunate loss. A 20-year, $500,000 Haven Term policy, issued by MassMutual, for a healthy 35-year-old woman, is $23.34 per month. For perspective, the average American adult spends around $50 every month on subscription services. Subscribe to Haven Life and ensure your family is set for the future. 

get started securely through Haven Life Insurance’s website
Disclosure: Haven Term is a Term Life Insurance Policy (ICC21 Haven Term in certain states, including NC) issued by C.M. Life Insurance Company (C.M. Life), Enfield, CT 06082. In New York (DTC-NY) and California (DTC-CA), it is issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.
Age Requirements
20 – 64
N/A
1 Minute Review

Haven Life is an innovative life insurance agency that offers a simple way to obtain term life insurance for those between the ages of 18 and 64. You can choose a term length of 10, 15, 20 or 30-years. What’s unique about this term life insurance is the way you can complete an application online and, if approved, digitally purchase coverage.

Haven Life is backed and wholly owned by Massachusetts Mutual Life Insurance Company, a trusted A++ business. You’ll get a user-friendly experience from Haven Life and enjoy MassMutual’s financial strength. Haven Life focuses on personable customer service (it has a rating of 4.8 out of 5 stars) and convenient modern technology.

Best For
  • Those looking for a digital buying experience
  • Relatively healthy individuals with no preexisting conditions
  • Individuals under the age of 64
  • Those looking for affordable premiums with robust coverage and additional benefits
Pros
  • Simple application process
  • Instant decision on coverage. If approved, it can start immediately
  • May not need a medical exam
  • Competitive rates, more affordable than industry averages
  • Excellent customer support
Cons
  • No permanent life plans offered
  • Higher rates for preexisting conditions
  • No coverage if you’re over 65

3. Fabric

Fabric offers term life insurance for individuals between the ages of 21 and 60. They believe that life insurance isn’t for you, it’s for your family. You can apply and see your price in under 10 minutes. Their policies are issued by Vantis Life, a Penn Mutual Company, so your policy is backed by a highly-rated, financially stable provider.

Apply online or in Fabric’s mobile app. They offer a range of term lengths and coverage amounts to help you find a policy that works for you. Choose from 10, 15 or 20-year terms and coverage amounts from $100,000 up to $5,000,000. 

To get an idea of how much you might spend on term life insurance with a Fabric policy, we gathered a real quote. A 20-year term life insurance policy for a 29-year-old female in excellent condition with a coverage amount of $250,000 would pay around $14.61 per month. That’s less than a burger combo at Shake Shack! Apply now and see what this affordable term life insurance will cost you.

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

4. Ladder

Life insurance is important for your family’s security. Start by understanding how much coverage you need with Ladder’s life insurance calculator and apply for coverage in less than 10 minutes. 

Ladder can even provide temporary insurance coverage while it finishes the underwriting process. Protect your family’s financial future with life insurance from Ladder.

The cost of Ladder life insurance is based upon your age, health and family medical history and other factors. Your monthly premium will also depend on your term length and desired coverage.

For example, a 40-year old male nonsmoker with no previous family medical history, 2 children, earning $50,000 annually with a $200,000 mortgage balance qualifies for $1 million in coverage for a 20-year term at $85 per month.

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

Final Thoughts

When you make a major purchase like a home or even a car, you spend some time learning about your options and the pros and cons of each choice. Your life insurance policy will protect your family for longer than most other purchases you might make. It makes sense to invest in the process and find the best solution for both your short term needs and your long-term needs.

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.