How to Buy Life Insurance

Life insurance policies can aid you in planning for the future and offer financial security to your loved ones in the event of your death. However, choosing the right policy could be difficult. The following steps can aid you in making crucial choices regarding the insurance policy you pick and what amount of protection you'll need and the insurance provider you choose.

  1. Decide if You Need Life Insurance

  When you are beginning to shop for life insurance One of the first questions to consider is whether you're in need of life insurance. As per the Insurance Information Institute (iii), most people have. While everyone's personal and financial situation is different in many ways, a life insurance policy is an excellent security net. It's especially important when you can prove the following valid:   What happens if you already have a life insurance plan from your employer? LIMRA warns consumers to not rely only on the company's life insurance policy, as it may not offer a substantial protection should the primary income earner pass away. In a single month, 25 percent of U.S. dual-income households would encounter financial difficulties due to losing one source of income, and 42% would be in trouble within six months.

If you are covered by an employer-sponsored Life insurance plan, which is also called collective life insurance make note of death-related benefits which is the sum that your beneficiary will receive in the event that you passed away. If the amount you receive isn't enough meet your needs then a separate life insurance policy might be an alternative. In the words of Catherine Theroux, Director of Public Relations at LIMRA states the fact that life insurance offered by employers may not be available after you quit your job.   Find the most suitable life insurance policy for you   Free quotes and comparison of life insurance policies, without providing your contact details.  

2. Determine How Much Life Insurance You Need

How much life insurance you require will depend on a variety of factors such as your household and personal income, the requirements of your dependents and potential beneficiaries, as well as the financial objectives you have set for yourself. Here are some of the questions you should consider when determining your policy's amount of coverage:   Deciding the amount of life insurance is a difficult task. It is often a matter of taking into account a variety of aspects of your overall financial picture. Therefore, it's an excellent idea to discuss your worries and goals to a trusted financial professional who can assist you in determining the best policy to support your beneficiaries as well as your overall financial plan.  

3. Determine Which Type of Life Insurance Is Right for You

There are two main types of life insurance you can pick among: term-life insurance, that lasts for a specific duration, or permanent life insurance that will cover your life for as long as you live. Knowing the main aspects of each type of insurance can assist you in selecting the most suitable one.

Term Life Insurance

The characteristics of term life insurance:   Term life insurance is insurance that covers the duration of the term. This includes short-term policies that run for one or five years as well as longer-term policies that are in force for between 15 and 30 years. The majority of term insurance policies come with fixed, often referred to by the term "level" premiums that stay constant throughout the life of the policy. Term life insurance can also provide an guarantee of death benefits as well as a guaranteed amount of money that is specified in the contract, which your beneficiary will receive in the event of your death.   In term life insurance policies, you can choose one to choose between two types of benefits in the event of death. One is a level benefit which means it remains exactly the same for the duration of the period of time that the policy is in effect. Another policy provides an increasing death benefit. This means that as time passes the amount you as a beneficiary will receive will decrease throughout the term that the insurance policy.   Life insurance policies for term life may even be renewable which means the policy is able to renew at expiration of the initial period. They may also be convertible, which means that the policy can be converted into permanent insurance. If you opt for the term-life insurance option, the beneficiary will receive only the death benefit as stated in the contract, following your death. This type of insurance doesn't have an investment or cash value component. It is also not possible to take out a loan or draw money from it while you're still alive.   For more details, check out our What is the term Life Insurance? guide.  

Permanent Life Insurance

Permanent life insurance is policies that will last the duration of your life. If you continue to make regular payments to your premiums the coverage will not be suspended. As with term life insurance, permanent life insurance comes with the death benefit, which is given to the beneficiary after you pass away.   Permanent life insurance usually comes with a Cash Value component. The cash value is different from the death benefit and acts like an investment account, from which you can borrow or withdraw the funds available. In the event that you have to pay for premiums a portion of your payment is deposited to an investment account. The value of your cash may increase or decrease based on the type of insurance you hold. In certain cases, the rate of growth is influenced by the interest rate or stock and mutual fund performance in the money market. In other cases the value increases because the insurer pays some of the earnings from its business which is also referred to as dividends, to the account holders. If you're considering purchasing a long-term coverage for life, it's great idea to discuss growth in cash value options with an insurance agent to decide which one is the best for you.   For more details on cash value, refer to the How does Life Insurance work? guide.

Whole Life Insurance

The characteristics of whole life insurance policies:   As with term insurance, whole life insurance provides a death benefit, but rates can fluctuate based according to the insurance you pick.   In addition to being a life insurance that is permanent, these policies typically also include the cash value which you are able to access prior to your the time of your death, either through borrowing against or taking out an account with cash value, or utilising the value as a way to pay premiums. The rate at which the value increases is dependent on the policy you select. There are various kinds of whole life policies in which the cash value is established at the start of the policy, as being types in which the value of cash increases by the dividends that are paid directly to the insurance company.   For more details, check out our What is Whole Life Insurance? guide.  

Universal Life Insurance

Specific characteristics of universal life policies:   Universal Life Insurance is a different kind of life insurance that permits policyholders to keep the coverage they have for the rest of their lives. In this kind of policy the premiums and death benefits aren't fixed and can be altered at the discretion of the owner. This gives policyholders the option of adjusting their policy in response to changing situations. But, the policy's value and premiums may also change depending on the performance of the investment market.   Universal policies also include the possibility of a growth in cash value in accordance with tax-deferred interest income. But, the value fluctuates based on the extent to which (or well) the investment portfolio of the company performs. If you're covered under an universal life insurance policy, you are able to use the cash value when you're alive or leverage it to pay premiums provided that you have a cash amount higher than the premium.   There are also Variable Universal Life (VUL) and index universal life insurance policies (IUL) that you can learn further about within our article on universal life insurance.  

No-Exam Life Insurance

Specifics of a life insurance policy No-exam life insurance is any policy, either permanent or term, that does not need a medical examination to obtain coverage. It's a great choice for people who want to skip a medical exam or who want to have faster and more convenient accessibility to insurance. However, this doesn't mean that providers will accept applications or set premiums without a second thought, but. Instead of using a medical exam the underwriter makes use of the available information to review applications and determine premium rates. The information can be gathered from many sources, such as driving and medical documents. Insurance companies also may use information that comes from MIB Group (formally known as the Medical Information Bureau), an insurance consumer reporting agency. There are trade-offs. Life insurance with no exam will typically cost more than alternatives. They may also provide lesser protection and flexibility contrasted with other policies. In particular, it might not be capable of converting the term policy into an insurance policy with a long-term coverage.   For more details, check out our What is no-exam Life Insurance? guide.   Find the right life insurance plan for you   Free quotes and comparison of life insurance policies, without providing your contact details.   Compare Quotes

4. Decide if You Need Life Insurance Riders

Riders are benefits or options you can include to your insurance policy to provide coverage that will meet your specific requirements. There are many types of riders that are available to policyholders and they all have the potential to affect the price of your policy.   These riders are often included in Life insurance policy:  

Children's Term Rider

This rider permits parents to join their children into the policy. If the child dies prior to reaching the age stipulated within the riders, then the insurer will pay an amount of death benefits to the policyholders.  

Accelerated Death Benefit Rider

With this rider to your insurance policy, you could have the ability to claim your death benefits prior to when you pass away in the event that you've been diagnosed with an illness or illness that is terminal.  

Accidental Death Benefit Rider

Also known by the name of a double indemnity rider it increases the death benefit that your beneficiary will receive in the event that you pass away from injuries from an accident that is covered.  

Waiver of Premium Rider

A waiver of the premium riders your insurance plan could help in the event that you are unable to pay the premium required because of an illness or injury that renders you disabled.   If you're thinking of including riders in your insurance policy make sure you discuss the idea with your broker, agent or insurance company before you do so. The availability of the rider, eligibility, and other restrictions may differ by policy and company, therefore it's essential to be aware of the rider's conditions that trigger it prior to adding the rider in your insurance policy.  

5. Choose a Life Insurance Company

The current market for life insurance provides consumers with a variety of policy options and providers. Consumers can also choose to partner with an insurance broker, insurance agent or an insurance companies. Understanding the differences between the two terms will help you choose an insurance policy or company that is suitable for your needs.  

Insurance Agent

  A licensed insurance professional is professional licensed to sells insurance products, such as auto, life or home insurance to the public. They could be an an agent who is captive that is, they represent only one insurance company, or they could also be considered an independent agent which means they represent several insurance companies.  

Insurance Broker

  Instead of representing the interests of one or more insurance companies The broker serves as the intermediary between their customers as well as the market for insurance. Brokers work with customers to assist them in finding the best, most comprehensive, and most competitive insurance policies offered by various firms. They do not however sub-write, bind or oversee any other aspect of the sales of policies.  

Insurance Company

  Also known as an insurer, provider, or carrier An insurance company is a company that packages and sells, underwrites, and bonds insurance policies. They also are the one which processes and pays claims.   Find the right life insurance plan for you   Free quotes and comparison of life insurance policies, without providing your contact details.   Compare Quotes

Tips for Selecting an Insurance Company, Agent, or Broker

No matter which one you pick regardless of which option you choose, there are a few ways to ensure you're working with a reputable agent or broker and to find a policy most suitable to your beneficiaries and you.  

Check Licensing

  Insurance companies and agents must be licensed to offer insurance in the state you reside in. Any reliable agent or insurance firm is likely to be able provide this information. However, you should also inquire with your department of insurance or department of finance or a similar governing body that supervises insurance companies within your particular state.  

Review Company Ratings

  A variety of independent agencies evaluate insurance companies on the basis of their financial strength or the ability to pay claims. When you are considering buying coverage, it's always a great idea to look over ratings from one or two top agencies.  

Get Reviews & Referrals

  Ratings from the official sources can provide an excellent idea of a company's financial health however, the experience of others can provide valuable advice. Reviews and recommendations from family members, friends, and financial experts you trust such as advisors, can help find an insurance company or broker or company.  

Check for Bundling Discounts

  A lot of insurers offer discount for customers who combine policies. If you already have another insurance policy, such as auto or homeowners insurance, you should check with your insurer to determine whether they provide life insurance, and in the event that they do, if they provide a multi-policy discount.  

Shop Around

  One of the most important tips you can take before buying a new insurance policy is to look around and look at the policies, insurance companies and rates. A broker in insurance can assist you with that. You can also obtain no-cost insurance quotes from an agent or an insurance company. Insurance Information Institute Insurance Information Institute recommends comparing three quotes prior to you choose.  

Consider Your Preferences

  Your personal preferences and goals can aid in making your selection.   A few questions to you should ask yourself:   If all else is equally, sometimes the best insurance company, agent or broker is the one that you are comfortable with and aligns with your personal preferences and objectives.   Take a look at the Best Life Insurance Companies of 2022 and Cheapest Life Insurance Companies in 2022 for assistance in choosing the right company for you.

How Important Is an Insurance Company's Financial Rating?

The financial score of an insurance firm can give you crucial details, including how likely they will pay insurance claims. In general, you should choose an insurance provider that has a reputation for paying out any claims that are eligible.   A variety of independent agencies oversee and rate insurance companies and you should think about contacting one or more of them prior to purchasing an insurance policy. The most well-known agencies are AM Best Company, Inc.; Fitch Ratings; Kroll Bond Rating Agency, Inc. (KBRA); Moody's Investor Services; and Standard and Poor's (S&P) Insurance Rating Services.   The agencies have their own rating scoring method and scoring metrics. The top rating agencies usually employ a variety of ratings that begin with a variant of A (e.g. A++ or AAA) for the top-rated insurers.   In general, the greater the rating is, the more trustworthy the insurance company. Life Happens is a consumer-focused insurance educational resource, warns consumers not to make decisions based solely on only ratings, principally due to the fact that ratings vary from one agency to the next.  

6. Purchase Your Policy

After you've decided on the kind and amount of insurance you're looking for and viewed free quotes and compared firms then it's time to start your application. The buying process may differ according to a number of variables that include the policy type as well as the company you choose as well as whether you work through an agency, broker and/or directly to the firm.   Completing the Life Insurance Application If you're purchasing a policy, you'll be required to fill out an application for life insurance, either online or through an actual form. No matter how you apply, you'll be required to provide basic contact details (e.g. names, phone numbers or email address, etc.) and indicate the type of insurance you're planning to purchase. It is also possible to require to provide the following details:   Based on the kind of insurance policy you select depending on the type of policy you choose, you might need to undergo a medical examination or screening. During the examination an expert medical doctor will keep track of vital information about your health including your weight, height as well as blood pressure. They can also take urine and blood samples.   If you're not able or do not want to take an examination for medical reasons It's possible to think about getting a no-exam insurance policy.  

Choosing a Beneficiary

When you purchase your insurance policy it is also necessary to choose your beneficiary that is the person or organization that receives the death benefit of the policy when you pass away.   You can select one or more persons such as children, couple, as an example - as the beneficiary of your insurance policy. If you wish to add multiple beneficiaries, it is necessary to define the amount of death benefits will go for each of the beneficiaries. For example, if you select your spouse and your children as beneficiary, you can decide that 40 percent of the policy will go to your spouse while the remaining 60% is given directly to the child.   It is not necessary to identify the beneficiary a person however. You may name a charitable organization or your estate a trustee as your beneficiary. If you choose not to select one of the beneficiaries or the chosen beneficiary cannot be found and the death benefit is not found, it will be distributed directly to the estate.   Additionally, iii suggests selecting the primary beneficiary, as well as an unconstrained beneficiary. If you pass away when your beneficiary who is the primary one still lives and is able to be reached, they will be eligible for benefits in the event of death. If the primary beneficiary has passed away or is not able to be located or cannot be located, your contingent beneficiary is eligible to get benefits from your death.  

Choosing a Minor as Your Beneficiary

If you are considering an insurance policy for life to ensure your children's future following your death, having the children as beneficiaries on the policy might appear to be the best choice. If your beneficiary is minor at the time of your passing the insurance company might not be able to pay the amount towards the person who is a minor. Instead, the case could go to a probate judge which will decide on a guardian.   There are many methods to avoid having to go through an probate court. This includes the designation of a custodian to supervise those funds till your kid attains adulthood, or setting up an estate plan, which names your child as the beneficiary of the trust's funds.   If you designate a minor as beneficiaries of the life insurance plan, consult with a financial expert who can help you decide the best method for ensuring that the death benefit is properly controlled and are transferred into your children.  

Life Insurance FAQ

What is the cost of life insurance? cost?

The cost of life insurance can vary between individuals. In general, premiums are determined by a combination of the following factors:   Another factor that affects the price in life insurance can be the method you pay for premiums. Some life insurance companies permit policy holders to select between annual or monthly payments. You may also be able choose different payment plans, such as semi-annual or quarterly payments.   In all options for payment the monthly cost will usually be less However, you'll need to incorporate that obligation into your budget for the month. The quarterly, semi-annual or annual payments could be more expensive, however, your financial obligation is restricted to four payments in total, either two payments or one payment per year.   Consider what type of insurance policy you have chosen to use and how it will affect the amount of premium you pay in the long run. If you have a perpetual life insurance policy that has money value might have the option of drawing on your cash balance to pay the premiums. But, remember that if your cash value exceeds the value of the premium, then your coverage might be cancelled.  
Type of Approval Description Fully Underwritten Requires a health questionnaire and medical exam. The least expensive approval type. Simplified-Issue Requires a health questionnaire but no medical exam. Premiums are more expensive than a fully underwritten policy. Guaranteed-Issue Does not require a health questionnaire or a medical exam. The most expensive approval type.  
When you submit an insurance application the insurer will review your the risk, accept (or decline) an application. They will also decide on the premium in an underwriting procedure. There are a variety of approval and underwriting which affect the cost and speed of the coverage.   Full underwritten insurance policies generally require applicants to undergo an examination for medical reasons, usually including urine and blood samples, along with an assessment of health. This will provide underwriters with the most thorough risk analysis. Thus those insurance plans that have been completely underwritten usually offer the lowest cost.   In the present, however, people can also buy life insurance policies that do not require a medical examination. In certain instances, such as policies using the simplified-issue underwriting procedure, the customer must only fill out an health questionnaire, but not a medical examination. The Guaranteed Issue life insurance policy remove health as a deciding aspect.   The processes for applications for simplified-issue and guaranteed issue policies tend to be faster. For instance, some insurance companies can even offer the decision and coverage the same day that an applicant is eligible to apply for the policy.   However, as they could carry higher risk for the insurer and are therefore more expensive than fully written policies. Certain applicants might also discover that they have less death benefits and have less options compared to fully-written policies.   Find the most suitable life insurance policy for you   Free quotes and comparison of life insurance policies, without providing your contact details. Compare quotes

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Best Life Insurance Companies of 2022 Here's a listing of most highly-rated life insurance firms of 2022. To learn more about each of them, head on over to the Best Life Insurance Companies of 2022 page. Here you'll find a brief overview of each firm, the reasons they're highly rated, as well as the kinds of policies they offer.  

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Other Ratings From 360 Reviews

Why You Can Trust Us: 25 Life Insurance Companies Researched

On U.S. News & World Report we rate our top choices of the Best Hospitals, Best Colleges and Best Cars to guide readers through the most difficult choices. We're 360 Reviews team draws on the same impartial approach to assess the products you use daily. To create our ratings, we looked up over 25 different life insurance agencies and companies and looked over 14 reviews from third-party sources. The 360 Reviews team does not accept samples, gifts, or loan of the products or services we evaluate. The products we provide to reviewers are given away after the review. Additionally, we have an entirely separate business team which does not have any influence on our methods or our recommendations.