If you’re searching for life insurance, you have a world of options in front of you.
Before purchasing a policy, though, you need a clear comprehension of how plans are priced, as well as what life insurance underwriters look for when evaluating an applicant for low-cost life insurance coverage.
Types of Low-Cost Life Insurance That Are Available
When it comes to life insurance coverage, there are two primary categories. These are term and permanent.
Both of these types of life insurance can be purchased as low-cost options online.
Term policies, for instance, only come with the death benefit.
Because there are typically no other fancy “bells and whistles” that are included with basic term life insurance, this type of coverage is usually priced much lower than a comparable amount of permanent insurance.
Due to those characteristics, term life offers a way for individuals to obtain a great deal of life insurance protection for a low cost – especially people who have good health and youth on their side.
Term life plans get purchased for a specific number of years, or “terms.”
These are usually anywhere from one year up to 30 or 40 years, depending on the applicant’s age and health condition at the time of policy application.
At the end of the period, provided that the insured is still alive and is still insured by the policy, the term insurance plan expires.
At the expiration point, the individual will need to obtain another insurance policy if he or she wishes to remain insured.
One then needs to purchase a new policy ASAP, in their present state of health and age, to get the best deal.
Because of that, the premium on their new coverage will usually be higher – and if they have contracted any adverse health condition, the premium could be a great deal higher – or they may even be declined for coverage.
There are many very good uses for low-cost term life insurance coverage.
For example, these plans are oftentimes considered to be “temporary” life insurance policies that cover temporary needs such as the time period of a home mortgage balance or the time period during which someone is saving for a child or a grandchild’s college education.
Permanent life insurance differs from term life insurance in that permanent coverage provides both a death benefit and cash value.
The cash value on a whole life policy accumulates on a tax-deferred basis, so until someone withdraws from the policy account, the money that grows in it will have no taxes attached to it.
Over many years, this can allow the cash value to build to a substantial amount.
The owner of the policy can borrow money from the policy and make withdrawals for whatever purposes they have.
But the policyholder should know that any unpaid balance will take away from the death benefit amount your beneficiary receives.
Because a permanent life insurance policy has both a death benefit and cash value, you can expect to pay higher premiums than you might with term life insurance offering the same amount of coverage.
However, provided that permanent life insurance is kept in force (by keeping the premiums paid), the amount of the premium will typically never go up.
Therefore, a permanent life insurance policyholder can usually count on the same amount of premium throughout the entire life of the plan.
In both cases – both term and permanent life insurance – the death benefit proceeds that are paid out will be income tax-free to the beneficiary.
But it is critical to understand that these proceeds could still be included in the insured’s overall estate for estate tax purposes.
What the Life Insurance Underwriters Need to Know
When an individual applies for low-cost life insurance online, the underwriters will require a few pieces of key information to assess your policy options.
First, in order to come up with a quote, the insurer will need to know the following:
- Your date of birth
- Your gender
- The state you reside in
- The amount of coverage you are applying for
- The type of coverage you are applying for (term or permanent)
- The length of coverage you are applying for (if applying for term life insurance)
- Whether or not you smoke (smoker policies are significantly more)
- If you have any adverse health conditions
Once you are ready to apply for the actual life insurance coverage, there is usually more in-depth information that the underwriters must have in order to come up with a decision regarding your policy price, as well as your policy’s classification.
For example, you will probably have to fill out and submit a life insurance application.
Within the application, you will be asked for more information regarding:
- Weight (in relation to your height)
- Marital status
- Whether or not you have children
- Occupation and income
- Smoking and tobacco usage
- Alcohol usage and amount
- Foreign travel (if applicable), and frequency
- Risk of hobbies like skydiving and scuba diving
You will most likely need to undergo a medical exam during the policy’s underwriting process.
Here, a medical specialist will assess your health, checking your blood pressure and heart rate. They will also ask you some extensive questions regarding your health condition.
Another part of the medical examination involves giving both blood and urine samples.
The life insurance company will take the medical examiner’s assessment and your blood and urine samples into consideration to classify your coverage and determine the risk of insuring you.
If a doctor has diagnosed you with certain health conditions such as high blood pressure or diabetes, your underwriters will probably ask for more in-depth information from you in order to come to a final decision regarding your policy.
For instance, when issuing life insurance for diabetics, the underwriters will require your age of diagnosis, as well as what type of medication – if any – you are currently taking in order to help you manage the illness.
All of these criteria will also factor into the overall decision about your life insurance coverage.
Likewise, if you have had any surgery within the past few years, you must share the details of the procedure, too.
The underwriters will need to know what type of surgery you had and the trajectory of your recovery.
For any additional information that may be needed, the life insurance underwriters may also seek out medical documentation from your primary doctor.
As soon as the underwriters have all of your health-related information on hand, they can make a coherent decision about how much coverage to provide and how much to charge you for it.
If you do not get approved you can look at getting a no exam policy, where you only have to answer questions on a questionnaire and do not have to do the full examination.
Understanding the Life Insurance Underwriting Process
After your information has been analyzed by the life insurance company – and provided that your application for low-cost life insurance online has been approved – your plan will likely fall into one of three primary categories or classifications.
While most life insurers differ in their actual classifications – and most will also have various sub-classifications – for the most part, life insurance companies have three main classes of insureds. These include the following:
- Preferred – If an applicant is in excellent health, with a family history exhibiting excellent health, they may be classified in the Preferred Policy category. This means that they pose less of a risk to the company for a potential claim – and therefore, they will be charged less for their policy premium.
- Standard – A standard policyholder is one who possesses “average” health. This means that he or she is in good – but not superior – health condition, so they will pay an average cost for their policy across the board.
- Sub-standard – A sub-standard policyholder is an insured who is in below average health, but not bad enough that they will be denied coverage altogether. Therefore, because the insurance company is taking on an additional risk for accepting the individual for life insurance coverage, the insurer must compensate for that risk by charging more in premium price.
How to Evaluate an Insurer
When looking for low-cost life insurance online, you may find that the prices can vary quite a bit – even between identical life insurance policies.
While this may not seem to make sense, there is oftentimes an explanation – and usually, it has to do with the insurer, as well as the underlying costs that the insurer has for its coverage, as well as its overhead.
The underlying financial strength of the life insurance company may be another factor – and this is something that is extremely important to be mindful of as you shop around for policies online.
Insurance companies are rated by several independent rating agencies – and these ratings are important to understand, as they can tell you a great deal about how strong the insurer is financially in terms of paying out its life insurance claims.
Rating agencies such as Standard & Poor’s, A.M. Best, Moody’s, Fitch, and Weiss all provide “grades” to insurers.
Typically, these grades are letters and are similar to those that are given on school report cards.
These letter grades can indicate an insurer’s financial strength, as well as its claims-paying ability and reputation.
In most cases, it is wise to stick with an insurer that has a letter rating of an “A” or better.
Be sure to remember that even if an insurer with a lower rating is charging a lower amount of premium, you will want the insurance company to be there in the future for your loved ones in paying out the needed financial claim.
How to Find Low-Cost Quotes
When searching for low-cost life insurance online, you should partner with someone who works with lots of life insurance providers.
This is because it will give you the opportunity to directly compare the cost of premiums, the amount of coverage and the types of policies available to you across the insurance field, side by side, without bias. That way, you can decide which one will best fit your specific coverage – and budgetary – needs.
If you’ve decided to purchase life insurance, you’re already off to a great start. The next step is allowing us to assist you as you shop for the best insurance rates. Whatever info you need, we can provide you with expert opinions and extensive data from our providers, no appointment needed.
Rather than waiting weeks for answers, get them in seconds by working with us. With the right information in hand, you can seamlessly apply for coverage, knowing your best options.
It’s as simple as filling out the form on our site and seeing nearly instant quotes, no stressful shopping needed.
Still have questions? If you aren’t sure what type of policy to pursue or have any general queries about life insurance, give us a call.
You can reach us at 888-229-7522, and let us take you through the quote running process and clear up all of your insurance questions.
We understand that obtaining life insurance can sometimes be a tedious process.
That is why we work to make it fast and easy so that you can move on to other important things in your life – while still ensuring that those you love are protected in case tragedy strikes.
Whether you give us a call or fill out our quoter forms- we’re here for you.