If you need to buy some life insurance, finding the right policy can seem like a daunting task. There are so many places to shop for life insurance and so many life insurance providers hawking their particular products that you may not know where to even start.
But shopping for life insurance online is often going to be your best bet in today's world. Most reputable life insurers will provide a range of quotes for their products at the touch of a button, and all you usually have to do is enter your age and the amount of coverage you want. Sometimes you are asked a few health-related questions, such as whether you use tobacco in any form.
Some people are worried about interference from commission-hungry salespersons who will try to get you to buy their policy, regardless of whether it is the best one for you or not. Getting quotes online eliminates that.
So here's Insuranceopedia to the rescue with a complete guide to finding the right life insurance policy for you via the internet. We'll go over the good, the bad and the ugly that come with most internet searches. Many visitors to this site are either here to look for an insurance quote or educate themselves about some aspect of a particular type of insurance. Here's what you need to know when you use our site to shop for life insurance.
First Things First
You'll find a plethora of articles available that you can read to learn all about the ins and outs of life insurance. You'll need to know answers to many questions, starting with the basics:
What is life insurance?
Life insurance is a legal contract between you and a life insurance company outlining the terms of coverage. The policy will specify the amount of premium to be paid and when payments will be scheduled. It will also state the policy's death benefit and explain any additional riders that come with the policy.
Why do I need life insurance?
If you have outstanding debts or a family to provide for, then you probably need to carry at least one life insurance policy. The cheapest option may be a group term life policy offered by your employer, but you may also need additional individual coverage.
What types of life insurance are there?
There are two basic forms of life insurance. Term life insurance offers pure death benefit protection, while permanent life insurance builds up a tax-free cash value over time. Term life insurance is usually sold for 1, 5, 10, 15, 20 or 30 year periods of coverage.
Permanent life insurance is designed to stay in force for the life of the insured. There are four major types of permanent life insurance.
- Whole life insurance is the oldest and most conservative form of permanent coverage, and it pays a guaranteed rate of interest in the form of policy dividends. Its premiums and death benefit are set when the policy is issued and cannot be changed.
- Universal life insurance is more flexible and pays interest into the cash value based on the prevailing interest rate environment. Premiums and the death benefit can be adjusted to accommodate certain factors.
- Indexed universal life pays interest into the cash value based on the performance of an underlying financial benchmark index such as the Standard & Poor's 500 Index. When the index rises, a portion of the gain is credited to the policy. If the index declines, then no interest is paid, but the cash value will not decline in value.
- Variable universal life (VUL) is the riskiest type of life insurance you can buy. The cash value in a variable contract is invested in a portfolio of mutual fund subaccounts that will rise and fall in value in tandem with the financial markets. It is possible to lose money in this type of policy during a bear market, but it is also possible to reap the highest rate of growth over time.
What are the advantages and disadvantages of the different types of life insurance?
Term policies are much cheaper than permanent coverage, but they only last for a limited period of time. Permanent policies can last for a lifetime, but they cost much more than term policies.
How much does life insurance cost?
The answer to this will depend upon the amount of the policy's death benefit, the age and health of the insured and the type of coverage that is purchased.
How much life insurance can I afford?
Only you can really answer this question. You will need to go through your budget and find places where you can economize in order to accommodate the premium payments that you will make for your policy.
Is term life insurance right?
It all depends upon your situation and what you need and can afford. Read on for more information on this question.
How much life insurance do I need to carry?
Again, the answer to this is dependent upon your financial situation and needs.
If you don't know the answers to these questions, don't feel bad. After all, you're not a licensed financial professional. You'll just need to do some research before you can get a truly accurate quote. In some cases, you may need to sit down with a financial advisor and go over your financial situation in order to determine the amount of coverage that you need.
If you have small children, then you will probably need more life insurance than you would if your kids are now in college. If you want to be certain to leave a legacy for your heirs, then some type of permanent coverage such as an indexed universal life policy could be a good choice. If you need a higher amount of coverage for a specific period of time, such as until you get all of your debts paid off, then a term policy could be the way to go.
You can also use a life insurance needs analysis tool like the one offered through Bridge Wealth Group in order to get an idea of how much coverage you need. This analysis will help you to determine which type of insurance is best for you, your family's (or other dependents') financial needs and the reasons why you should have some life insurance coverage.
Once you have completed the analysis, you can save it to your files so that you have it handy when you go to apply for coverage. If you have further questions that arise during your needs analysis, just click on the request more information button on the quote tool.
Getting a Life Insurance Quote Online: The Good
The good news here is that in order to get a life insurance quote on our website, just go to the life insurance quote comparison tool and type in the information that is requested. First, you will select which country you live in (either the U.S. or Canada), then you will enter the rest of the search parameters, including your state or province of residence, date of birth, gender and the type of insurance that you are looking for.
The search engine will come back with a full range of quotes listed in order from the cheapest to the most expensive. The quote from a given company can depend on such factors as the company's financial stability, the terms of coverage and your health condition.
Getting a Life Insurance Quote Online: The Bad
Once you get a list of quotes, you may be tempted to simply go with the cheapest option available. This is not necessarily always a good idea. The bad news is that the cheapest option may be offered by a company with a mediocre financial rating or else have conditions attached to the policy that deny coverage under certain circumstances.
Make sure that you thoroughly understand the terms of any policy that you choose to buy so that you won't have any unpleasant surprises later. There's nothing worse than paying the premiums for a policy for several years and then discovering that it won't pay out its death benefit due to some exclusion that is contained in the fine print.
Getting a Life Insurance Quote Online: The Ugly
The ugly part of getting a life insurance quote has to do with your current state of health. There are a number of health conditions that can make getting coverage more expensive. Some of these conditions include:
Excessive alcohol consumption.
Cirrhosis of the liver.
High blood pressure.
Respiratory and lung disorders.
These are just some of the health conditions that can cause your life insurance policy to be "rated up", which means that it will be more expensive. Just using tobacco can raise your rates by 30 to 60 percent, depending upon your age and other factors. The younger and healthier you are, the cheaper your life insurance will be, regardless of the type or amount of coverage that you buy.
But not all life insurance companies are equal when it comes to underwriting an insured that has one or more given health conditions, such as the ones described above. Some insurers are far more forgiving when it comes to certain types of health risks than others, so it always pays to shop around, especially if you're on a limited budget.
But different insurers specialize in covering people with different health conditions, so you need to look for an insurer that specializes in issuing policies to people with your health conditions. There is almost always at least one insurer out there that will cover a given health condition, although the insured may get rated up. But even a small amount of more expensive coverage is better than none in most cases.
Another important factor to consider is whether a given policy has any accelerated benefit riders (ABRs). These riders represent the future of the life insurance industry, because they allow a single life insurance policy to provide several different kinds of protection in addition to its mandatory death benefit.
These riders will pay out some or all of the death benefit to the insured while he or she is still living and becomes incapacitated or diagnosed with a major disease. There are accelerated benefit riders that cover long-term care, disability, critical and chronic illnesses among other conditions.
The real advantage of these riders is that they are much cheaper than the cost of a standalone policy for long-term care, and the insured is guaranteed to get something out of the policy one way or another in most cases. ABRs are available for both term and permanent policies, but they are much more commonly used in the latter type of policy.
If the insured ends up not needing long-term care coverage, then he or she can use the cash value in the policy to pay for other things or the beneficiaries will collect the death benefit upon the death of the insured. But there is no chance that the insured will pay monthly premiums for a type of coverage that ends up going unused.
Another ugly aspect of buying life insurance surfaces when it comes time to renew your term life insurance coverage. Let's say you just want to get some life insurance in place, but your budget is limited in the amount you can afford. In this case, you would purchase a 10-year term life insurance as it is usually the least expensive. When the 10-year term life policy is due for renewal, you will have a few options.
You can accept the renewal rates as per the original application. These rates will be significantly higher than applying for a new life insurance policy. Still, you don't have to qualify medically.
You can apply for a new policy. You are now ten years older, so it will be more expensive than the original policy. What happens if you develop a medical or health condition where you won't qualify, or you might be rated? You potentially might not be eligible for a new life insurance policy and will have to accept the renewal.
You can exchange the original life insurance policy for a longer term life policy with no medical exam. Some insurance companies have these options, and some don't. Some can exchange up to 5 years and some up to 10 years. But you might not know this upfront. You also won't be aware of what you can exchange or convert to later on.
Applying for and evaluating life insurance policy options can be overwhelming. Collecting online quotes can save you some of the legwork and help clarify your needs and preferences. It's important to persevere through the good, the bad and the ugly and ensure you get coverage in place.
The best type of life insurance to have will be the one you have in place before it is needed. We just don't know when that time is
— Darrel Pendry
How Well Do You Know Your Life Insurance?
The more you know about life insurance, the better prepared you are to find the best coverage for you.
Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.