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.
The Best Life Insurance:
- Best No Medical Exam Life Insurance: Bestow – see plans starting at $8/month
- Best Term Life Insurance: Haven Life
- Best for People With Children: Fabric
- Most Flexible: Ladder
- The Best Life Insurance:
- What is Life Insurance?
- What to Consider Before You Get a Life Insurance Policy
- Term Life Insurance
- Permanent Life Insurance
- Whole Life Insurance
- Who Needs Life Insurance Coverage?
- How Much Life Insurance Do I Need?
- The 4 Best Life Insurance Companies
- Final Thoughts
- Frequently Asked Questions
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.
The 4 Best Life Insurance Companies
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. Best for Term Life Insurance: 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.
2. Best for Term Life Insurance: 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.
3. Best for People with Children: Fabric
Fabric offers term life insurance for individuals between the ages of 25 and 50. They believe that life insurance isn’t for you, it’s for your family. You can apply in as quick as 10 minutes and could be offered coverage on the spot. 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.
4. Most Flexible: 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.
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.
Frequently Asked Questions
1) Q: I have life insurance through work. Do I need more coverage?
Most group life insurance policies offered through employers offer a death benefit equal to 1-3 years of salary. For many households, this amount won’t be enough to retire debt or provide for the surviving family. A commonly used rule of thumb suggests that you should have at least 8-12 times your income in life insurance coverage.
2) Q: How much life insurance do I need?
Many in the industry recommend that you carry 8-12 times your annual income in life insurance coverage. A more granular approach can be beneficial, however, and accounting for debt and ongoing financial commitments in more detail when choosing a coverage amount can better provide for your family than an arbitrary multiple of earnings. Get a customized quote for the best policy.
3) Q: How can I lower my life insurance premiums?
Life insurance premiums are based on age, insured amount, and a number of health and behavioral risk factors. Rates have fallen in recent years as longevity has increased and insurers have become better at pricing risk factors. If you have an old policy, it may be possible to replace your coverage for a lower premium with a new policy. If you don’t have coverage yet, don’t wait too long to buy a policy. Rates increase with age. Many insurers also offer a sizeable discount on auto insurance if you have a life insurance policy with the company as well, creating a way to save money on your overall insurance costs. Get the best deals here.
Our Recommendation: Find your best fit with Policygenius
Finding the right company for your situation means considering all of your options and getting the right advice. Policygenius makes it easy to get personalized quotes from top insurers and apply for your best policy all in one place. Their combination of online tools and support from unbiased, licensed experts makes Policygenius the best site to help you get insurance right.