It’s almost too easy to shop for life insurance online. Just enter your age and gender you can see a variety of quotes for coverage to protect your family.
Don’t get me wrong: I like convenience. I like shopping online. And anyone whose financial life is intertwined with someone else’s needs life insurance right away.
So where’s the problem? Easy shopping can sometimes lead to bad decisions. Life insurance matters too much for someone to simply opt for the cheapest coverage they see in a quote generator.
And the best quote doesn’t always lead you to the right coverage. Not only can your coverage’s actual premium exceed your quote, but the quote tells you nothing about the quality of your coverage.
So let’s slow down a minute and look at different coverage plans, a few different life insurance companies, and at the anatomy of a life insurance quote to learn how it relates to your actual premium.
Quick Guide To What We Will Cover:
Factors Affecting Life Insurance Quotes
A quote is an estimate based on factors you enter online or share with an agent in person. Factors include:
Younger people usually have access to the lowest quotes and premiums in the market, especially for term life coverage.
The reason is obvious to most people: Statistically speaking, someone who is 35 years old will live longer than someone who is 55. The longer your life expectancy, the lower your quotes and premiums should be.
Women can expect to pay less for life insurance than men for the same reason: Men die at younger ages, according to statistics.
Most online quote generators have a drop-down box for your health status. You can choose “Excellent,” “Good,” and so on.
The better your health, the lower your quote.
But translating a quote into an actual premium could require a medical exam, especially for policies with enough coverage for someone with a lot of financial responsibility.
So be sure you enter the most precise health summary to get the most precise quotes.
If you smoke or use other forms of tobacco, expect to pay a lot more for life insurance coverage. Everybody knows the dangers of smoking by now, so there’s no need for me to go into detail here.
But to put it in perspective, someone who smokes will typically pay five to 10 times more for life insurance.
The amount of coverage you need will directly affect your quotes and premiums. Generally, more coverage costs more money. You can measure coverage amount as the size of your coverage and the length of time you’ll keep the coverage.
Quotes vs. Premiums
A life insurance quote tells you what someone with your age, gender, and health status could pay for life insurance coverage.
A life insurance premium reflects the actual cost of your coverage after the underwriting process has either confirmed or contradicted the information from your quote.
If the medical exam discovers you have high blood pressure or high cholesterol, for example, you may be bumped into a different classification which could require higher premiums.
Not all insurers have the same underwriting criteria, so you should take your time and explore different options instead of going with the lowest quote you see.
Different Kinds of Life Insurance Coverage
The type of life insurance coverage you buy will affect your quotes and your premiums, usually in significant ways.
Term Life Insurance
Term life coverage lasts for a specific period of time and then expires at the end of the term if you did not cancel the policy before that time. Because it expires in usually 10, 20, or 30 years, a term life policy typically costs less than other kinds of coverage.
Paying less for your coverage can allow you to buy more coverage. If you’re young and have a family who depends on you financially, you may want $1 million or more in coverage. Term life makes this possible.
Whole Life Insurance
Whole life coverage can last the rest of your life, so it usually costs significantly more than a term life policy.
Also, whole life coverage accrues cash value over time, adding even more to its quotes and premiums.
This added cash value can be useful in the coming decades. It can function:
- Like a savings account: You can borrow against the cash value or surrender the policy and claim the cash later in life.
- As an investment vehicle: Some kinds of policies invest your policy’s cash value in stocks, bonds, or mutual funds. The simplest version of this policy ties your cash to a stock index such as the S&P 500.
- For added flexibility: In other policies, the relationship between your insurance coverage and the cash value fluctuates, meaning you could use the cash to defray the premium costs.
Because of their flexibility and complexity, whole life insurance should be part of your overall financial plan. You may prefer to work with a financial advisor to buy this coverage.
No Exam Coverage
A lot of insurance shoppers fear needles or they don’t want to spend time scheduling a medical exam.
No-exam coverage can help, but this help comes at a cost. If you’re relatively young and healthy, you could get a lot more coverage for less money by going through with the medical exam.
Guaranteed Issue Coverage
Expect to pay a high premium in exchange for this certainty. Your coverage will be low, too — usually around $25,000 or less. Often these policies require a waiting period of one to two years before your family could file a claim.
Choosing a Life Insurance Company
Living in a free market economy has taught us to seek the lowest price, and this instinct serves us well at the grocery store, on Amazon, and even on a car lot.
Life insurance is more abstract than most things you buy, so you can’t always tell whether the lowest quote will deliver the best coverage. Since you won’t be around to find out, it’ll be your family who deals with the outcome.
So along with price, you should consider the following.
A Company’s Quality
Just about any insurance company boasts about its quality, stability, and safety. It’s up to you as a shopper to scrutinize these claims.
Fortunately, you have a lot of help from independent insurance company ratings agencies such as A.M. Best and Moody’s. These agencies give insurance companies a grade. Higher grades reflect more financial stability now and, presumably, into the future.
Quotes vs. Premiums, Again
Some companies reel you in with low quotes online and then expect you to accept higher premiums. They depend on you not wanting to pull the plug on your coverage after you’ve already gone through a medical exam and other underwriting chores.
More often, though, underwriters legitimately discover something in your medical records or your exam results — or in your credit history, driving history, or occupational hazards — that requires a higher premium.
In these cases, you’d do better to back off and seek guidance from an independent life insurance agency that can match you with an insurer more likely to offer low rates to someone with your status.
Your Actual Needs
You can save a lot by finding just the coverage you need. When you just need a way to replace your income in case you die unexpectedly while your kids are still young, a term life policy can provide your coverage for less. You might not need the extra expense and complexity of whole life coverage.
Likewise, if you just want to cover your final expenses to make things easier on your adult children, a simplified or guaranteed issue policy with a small coverage amount may work.
Three Top Life Insurance Companies
Hundreds of companies offer life insurance policies. Many of them offer great coverage at low rates. Choosing a Top 10, or even a Top 25, will inevitably leave out some great options.
Still, some companies stand out because they can help a wide variety of people find top-quality, affordable coverage. Here are three companies we’d recommend for just about anybody.
Haven Life has been revolutionizing online access to term life insurance for the past several years. The recipe is simple:
- MassMutual coverage which is rated top-notch by A.M. Best.
- Intuitive access to quotes and policies online.
- Interactive customer service to help guide you through the process.
Haven Life offers only term policies, so you’ll have to look elsewhere for more complicated coverage. If you need a term policy, Haven Life can connect you with quality, affordable coverage today.
Some applicants can even get a best-of-both-worlds policy: the lower rates and higher coverage amounts of medically underwritten coverage without the medical exam.
Typically, no-exam coverage costs a lot more. But by accessing your medical records and pharmacy records online, Haven Life can find out a lot about your health without a medical exam. This program is available only for people 45 and younger.
Even if you do need a medical exam, you can save a lot of time and money with Haven Life.
Banner Life has emerged as an all-around leader in the life insurance industry over the past three decades. The company traces its roots to the early 19th century.
You can buy term or whole life insurance coverage through Banner Life, which has earned superior ratings from A.M. Best. While the company offers great prices on its quality coverage, people in average to good health can often save even more compared to other policies.
With its online application, Banner Life combines a modern approach with a tradition of financial stability which is hard for its competitors to match. The company also offers 15- and 25-year term policies along with the more traditional 10-, 20-, and 30-year terms.
Banner also sells annuities which can help with retirement planning.
American Insurance Group, which most people call AIG, offers term and whole life insurance policies through its subsidiary AIG Direct.
This company also combines its long history of stability with a modern approach which makes its policies accessible to more customers. The company has an excellent rating from A.M. Best.
Customers with diabetes or a history of being overweight can often save with AIG Direct compared to other companies.
AIG Direct sells term and whole life policies.
Bottom Line: A Quote Can Guide You
A life insurance quote can give you a good idea how much you’d pay for life insurance coverage, but only the underwriting process will determine your actual premium.
You should always enter accurate information in a quote generator. For example, if you know you have high blood pressure, don’t enter “Excellent” as your health status.
And no matter how good a quote looks, be sure you’ve checked out a company’s financial health. Your coverage won’t help your family if you outlive your insurance company.