When shopping for life insurance, you’re likely to have many questions. From deciding on the right coverage amount to choosing among different policy types, it can be hard to know where to start. While life insurance needs vary from person to person, there are common questions that are likely to arise for most people during the life insurance shopping process. In this article, we’ll walk through some of these questions to help you feel more confident in making decisions about life insurance.
What is life insurance?
At its most basic definition, life insurance is a contract between you and a life insurance carrier that ensures financial protection for your loved ones if you pass away. In a greater sense, it’s a safety net that offers invaluable peace of mind to you and those who matter most to you. Life insurance can help your family meet financial obligations like mortgage payments, college tuition, final expenses, daily expenses, income replacement, and more.
What are the different types of life insurance?
Term life insurance offers coverage for a specific period of time, so you only buy it for as long as you’ll need it. Common term lengths are 10, 15, 20, 25, and 30 years, making it easy to customize your policy for specific financial goals and obligations.
Permanent life insurance represents a category of several types of life insurance without a pre-set expiration date. When you purchase permanent life insurance, you are permanently covered, regardless of how long you live, and the coverage does not expire as long as premiums are paid.
Whole life insurance is a type of permanent life insurance and provides a set amount of coverage (decided by you) for as long as you live, for which you pay monthly premiums. In addition to the death benefit, whole life insurance also includes a savings component, also known as the cash value.
Universal life insurance is another type of permanent life insurance that provides both a death benefit and cash value accrues and earns interest as you pay your monthly premiums, meaning you can also use this policy type as a savings account.
Final expense insurance, also known as burial insurance, helps cover end-of-life costs, including funeral expenses, credit card debt, medical bills, and any other debt you don’t want to pass on to those closest to you. Final expense insurance does not require a medical exam, making it an appealing option for both seniors and individuals with health complications.
Who needs life insurance?
Everyone can benefit from life insurance coverage. Essentially, if you have loved ones who depend on you financially, you probably need life insurance. Expenses like mortgage payments, credit card debt, and other financial burdens can fall on your loved ones after you’re gone, and life insurance is an affordable way to make sure your family will be financially secure if they lose your income. Even if you don’t have dependents who rely on you financially, the cash value of a permanent life insurance policy can help you supplement funds for milestones like retirement. You can even choose to donate your life insurance benefits to charity, ensuring you leave behind a meaningful legacy.
What type of life insurance is best for me?
The right life insurance policy looks different for everyone, but it helps by starting with the question: term life or whole life? Both options have advantages and considerations, so before making a decision, it’s best to understand the differences between the two. Learn more about the differences between term life insurance and whole life insurance.
Is life insurance through my employer coverage?
Group life insurance is a popular benefit that many employers offer. While this policy type is often very affordable and easy to qualify for, it likely won’t offer enough coverage. And, if you leave your employer, you lose your coverage. Overall, group life insurance is best used as a supplemental policy alongside a policy that you purchase individually. Learn more about the pros and cons of employer-provided life insurance.
What type of life insurance coverage do I need?
Life insurance coverage needs vary from person to person, but there are certain factors to consider to determine how much you need. Factors such as anticipated final expenses, living expenses for your surviving family members, outstanding loans, and mortgage payments can be a starting point to help you determine what you want to get out of your coverage.
How much does life insurance cost?
The cost of life insurance will vary significantly depending on many factors, including the policy type, coverage amount, your age, health, gender, lifestyle, occupation, and hobbies. It will also depend on the coverage amount you purchase. Generally, the younger and healthier you are when you purchase life insurance, the more affordable it will be. Knowing the amount of coverage you’re purchasing can also help you estimate the cost of life insurance. If you’re not sure how much life insurance you need, our life insurance calculator is a great place to start.
How is the cost of life insurance determined?
The cost of life insurance is determined during the underwriting process, which uses several factors to determine your monthly premium. These factors include:
Type of policy: Term life insurance is typically more affordable, as you’re only paying for as much coverage as you need. On the other hand, while whole life tends to be more expensive, it provides coverage for your entire lifetime.
Amount of coverage: The longer your term or greater your life insurance coverage amount, the more expensive your premium is likely to be.
Your age and gender: Your rate is set when you sign your policy and it shouldn’t change during the duration of coverage, but the cost of purchasing life insurance increases as you age. Additionally, part of the underwriting process includes evaluating how long you might live, and since women tend to live longer than men, women often receive lower life insurance rates.
Your health and lifestyle: For both term and permanent life insurance, you have to complete a basic medical exam as part of the application process. Some factors that might result in higher premiums include high blood pressure, high cholesterol, HIV/AIDS and hepatitis, hypoglycemia, chronic illness, nicotine use, or recreational drug use. Additionally, if you participate in extreme sports or high-risk hobbies, you’re considered a bigger risk to the insurance company and might see a higher premium for both term and permanent policies.
Why should I buy life insurance?
Life insurance is a great way to make sure your loved ones are financially secure should the unexpected happen. It’s a safety net so your family can continue living life in the event you are unable to financially support them. Life insurance can give you and your family peace of mind
What are some tips for buying life insurance?
Before you buy life insurance, consider how much life insurance you will need to replace your income now and in the future, such as education, family events, retirement savings, etc. Additionally, think about who depends on your income today. From spouses to children, business partners to loan co-signers, it’s important to consider everyone who can benefit from your smart decision to buy life insurance.
Can I get a free life insurance quote?
Getting a free life insurance quote is as easy as connecting with SelectQuote. We’ll ask you for some personal information and get to know more about your lifestyle to make sure we’re finding the kind of coverage that’s right for you. Our quick and proven process will help you find the best available results for your health, lifestyle, and budget.
Why should I let SelectQuote shop life insurance policies for me?
At SelectQuote, we have nearly 40 years of experience helping people with different needs and priorities find affordable life insurance. Our licensed insurance agents will take the time to get to know your situation, learn more about your coverage goals, and provide unbiased life insurance quotes from trusted carriers. We’ll take the guesswork out of the life insurance shopping process, helping you quickly and easily find the right policy for your needs.
