When searching for life insurance, there are a number of options for potential policyholders today. Before purchasing a policy, though, it is important to have a good understanding 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.
With term life insurance, you obtain only death benefit protection. 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 life insurance coverage. Because of this, term life offers a way for individuals to obtain a great deal of life insurance protection for a low cost – especially for those who are young and in relatively good health.
Term life insurance policies are purchased for a certain amount of time, or “term.” 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 policy will expire.
At that time, the individual will need to obtain another insurance policy if he or she wishes to remain insured. They will need to do so at their then-current age and health condition. 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 in a permanent policy is allowed to grow on a tax deferred basis. This means that there will be no taxes due on the gain in the funds until the time that they are withdrawn. Over many years, this can allow the cash value to build to a substantial amount.
The policyholder is allowed to either borrow or withdraw the cash that is inside of a permanent life insurance policy for any need that he or she sees fit. It is important to note, however, that any unpaid balance will be charged against the amount of the death benefit that is paid to the policy’s beneficiary.
Because a permanent life insurance policy has both a death benefit and cash value, the premium that is charged will be more than that of a comparable term life policy. However, provided that a permanent life insurance policy 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. However, it is important to note 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, there is some specific information that the underwriters will need to know. 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)
- If you are a smoker or a non-smoker (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 will need to know in order to come up with a decision regarding your policy price, as well as your policy’s classification.
For example, you will typically be required to fill out and submit a life insurance application for coverage. On this application, you will be asked for more information regarding:
- Height and weight (your weight as it relates to your height)
- Marital status
- Whether or not you have children
- Occupation and income
- Smoking status/tobacco usage
- Alcohol usage and frequency
- Foreign travel (if applicable), and frequency
- Whether or not you participate in dangerous hobbies such as skydiving or scuba diving
It is also probable that you will need to take a medical exam as a part of the policy’s underwriting process. Here, you will meet with a paramedical professional. This individual will take your blood pressure and heart rate readings. They will also ask you more in-depth information about your health condition.
Another part of the medical examination entails providing a blood and urine sample. These samples will be analyzed by the life insurance company for various health issues that could pose additional risk to the insurer.
If you have been diagnosed with certain health conditions such as high blood pressure or diabetes, then it is likely that the life insurance underwriters will need more in-depth information from you before they will be able to make a final decision about your coverage. For instance, when issuing life insurance for diabetics, they will need to know when you were first diagnosed with your condition, as well as what type of medication – if any – you are currently taking in order to help with managing and / or controlling your condition. 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 will also need to provide more information about this, too. The underwriters will need to know what type of surgery you had, as well as how – and how well – you are recovering. For any additional information that may be needed, the life insurance underwriters may also request your medical records from your primary care physician.
Once all of your health related information has been obtained by the life insurance company, the underwriters will then be able to make a much better-informed decision regarding your policy and your premium price.
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 policy will likely be placed 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, and he or she also has a family history of excellent health as well, then it is possible that they could be placed into the Preferred Policy category. This means that they are less of a risk to the insurance company of a potential claim – and therefore, they will be charged less for their policy premium.
- Standard – A standard policyholder is one who is considered to be of “average” health. This means that he or she is in good – but not superior – health condition, and will, therefore, pay an average amount of premium that is in line with other “average” policyholders.
- Sub-standard – A sub-standard policyholder is an insured who is in below average health, yet not poor enough to 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 a great deal – even for identical life insurance coverage. 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.
It may also have to do with the underlying financial strength of the life insurance company – and this is something that is extremely important to be mindful of when you are shopping for insurance 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.
It is important to keep in mind 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, it is typically best to work with a company that has access to many different insurance carriers. This is because it will give you the opportunity to directly compare policies, benefits, insurers, and premium rates side by side on an unbiased way and in turn, to determine which one will best fit your specific coverage – and budgetary – needs.
If you are ready to start your search for low-cost life insurance online, we are here to help. We work with many of the best life insurance companies in the marketplace today – and we can help you in obtaining all of the important information that you need quickly and easily, without having to meet in person with a life insurance agent. Everything can be done directly from your computer – and you can have the details that you need within seconds – not days or weeks – so that you can make your decision much more quickly, and can then apply for the coverage that you need in order to protect the ones that you love. When you are ready to start the process, use the form on this page to get a set of initial quotes.
Should you find that you have any questions at all along the way concerning life insurance policies, obtaining premium quotes, or even just about life insurance, in general, please feel free to contact us directly. We can be reached via phone, toll-free, by calling 888-229-7522. Our experts are available to walk you through the quote running process, as well as for answering any of the questions or concerns that you may have.
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 of the unexpected. Contact us today – we are here to help.