How Do I Choose The Right Life Insurance Policy?

Savvy planning can ensure that you or your family members are covered if faced with the death of a loved one. The ideal tool to guard against a sudden lack of income or ongoing financial obligations is a life insurance policy, and there are a number of choices available. Make sure you compare life insurance providers before you make any decisions to ensure that you get the policy most suited to your family.

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Types of Life Insurance

There are different types of life insurance coverage available and are designed to serve different policyholder needs and wants. The degree of variation means that individuals of all ages and backgrounds can find the right policy. For instance, term life policies are generally a good choice for younger people who want inexpensive, steady rates and coverage with a defined expiration. On the other hand, flexible permanent life plans that accrue cash value or enable the policy owner to adjust premiums and death benefits at will are more appropriate for individuals whose needs change over time.

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Bestow

Bestow brings the process of buying term life insurance entirely online. With this company, you don’t have to go through an agent to buy life insurance or submit to a medical exam. Answer some questions and Bestow will offer you instant quotes for policy options with up to $1.5 million in coverage. There are some limitations, though. Bestow only issues policies to people under 55 and terms are limited to 10 and 20 years. Read the full review.

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Ladder

Ladder offers term life insurance online issued by Allianz Life Insurance Company of New York in New York and Allianz Life Insurance Company of North America in all other states and DC. U.S. residents aged 20 to 60 can apply for coverage online and get an instant decision. Ladder’s policies are designed to allow users to move their coverage amount up and down by applying online for more coverage or decreasing coverage with a few clicks. Read the full review.

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Ethos

Ethos offers a simple way to buy life insurance directly without the hassle of going through salespeople or agents. They partner with top-rated carriers and use proprietary software to create a 100% online, ten-minute application to match you with the right policy. They provide a wide range of whole and term life insurance policies, and more importantly, they don’t require any medical exams. Their website is comprehensive, clear, and easy to navigate, and their team of agents are there to help customers navigate any challenges. Read the full review.

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Why Choose Term Life Insurance?

Term life insurance is simple, cost effective, and is an appropriate option if you want cover for a defined period, replacing an income, or protecting a financial obligation like a mortgage. In general, the younger you are, the cheaper your premiums. Depending on the provider, term policies usually come in 2 different forms: 

Level premium term life 

This offers coverage for 10, 15, 20, or sometimes 30 years at a fixed monthly rate. The fixed rate per month keeps you insured for the value of your policy over the entire length of the term, until it expires. Its simplicity is one of the reasons why it is often cheaper than other plans. 

Budgeting with a term life insurance policy is easy because the rate never changes, and customers can apply for a death benefit that is the same amount as their mortgage. You pay a small premium each month to ensure that in the case of your untimely passing, your family will be able to continue making mortgage payments. 

Whole Life Insurance

A whole life insurance policy will cover you for your entire life and can be useful when paying for all the expenses that arise when someone passes, such as funeral costs, estate planning, medical care and financial protection for the surviving spouse. Payment is guaranteed, provided policymakers meet the monthly premium obligations. 

Premiums for these policies are typically higher than those of term life plans, however the flexibility that financially savvy customers enjoy with whole life plans make them worthwhile. There are also plans that allow policyholders to adjust their premiums upwards to receive a bigger death benefit, or take advantage of the policy’s cash value in other useful ways. Dividends are paid on some whole life plans that can either add value to the death benefit or are received as cash. Additionally, other plans allow policy owners to withdraw money directly from the policy or take out loans against its value, and the death benefit is tax-free when it is paid out. 

Whole life policies often come with an assortment of riders that provide additional special features, which vary by provider. A common rider is the ability to accelerate benefits when the policy owner falls ill, helping cover medical expenses and other long-term care needs. 

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Yearly renewable life 

This is another type of term policy that expires once a year and can be renewed with no break in coverage, though policyholders are subject to changing rates. This is ideal for those who believe their income will increase in the coming years and want more flexible protection. 

One interesting feature of this type of cover is the return of premiums rider, which refunds money paid as premiums to the policy owner when he or she outlives the term. Another is the convertible rider that exempts policyholders from taking a medical exam should they want to convert their term policy into a permanent life policy spontaneously. Riders are additional benefits that supplement the features of a normal life insurance policy, and some of the unique riders from competing insurance providers are what set them apart.

How Much Coverage Do I Need?

It can be daunting to figure this out but evaluate your current financial situation today, and what foreseeable expenses will need to be covered 10 to 20 years down the road. 

When deciding how much coverage to purchase, ask yourself these questions:

• How long do I need coverage? If you just got married and are starting a family, you will need at least 20 years of coverage to ensure that your children are provided for until graduation.
• How much can I afford? Find the balance between buying enough coverage and having a monthly premium that fits in your budget. The more coverage you purchase, the more expensive your premium (the amount you pay) will be.
• What will my family need if I pass away today? If something were to happen to you today, there would be a lot of financial expenses placed on your family's shoulders. 

Whether you choose term or whole life insurance depends on your current and future financial needs. Either one is essential to have, especially if you have loved ones who rely on you for financial stability. 

How to Apply for Life Insurance

The process of applying for life insurance always begins with determining the amount of coverage and monthly rate that is approved for each customer. For some providers, such as Bestow, this is done via an easy quoting tool, which takes some basic customer information and runs it through an automated calculator before listing a price and a way to apply for coverage. With other providers, receiving a quote may not be quite as straightforward as quotes are only available via speaking with a representative. The application processes vary widely between providers. 

After the online tool, the agent or representative uses the financial, medical and other personal information provided to determine an appropriate amount of coverage. You'll then need to undergo a medical exam, unless the provider offers an exemption, and it must be performed within a certain period after applying. 

Companies such as Ethos and Ladder offer instant coverage through an online application, exempting many from the medical exam that is often necessary before receiving approval. This allows those who need a quick coverage solution to resolve the matter within a couple days rather than the weeks it takes with some providers. Regardless, once approval is finalized, policy coverage begins immediately alongside monthly premium payments.

Underwriting 

The underwriting process when applying for term life insurance can be significantly longer and more involved than other types of insurance. This is because companies take greater care—for example, medical examinations—to limit their exposure to risk, due to the level of funding that goes into death benefits. 

Getting the right life insurance policy can give you and your family peace of mind should your circumstances take a turn for the worse. As this is a very important decision that could affect the future of your family, it’s important to compare all the best life insurance companies available and choose the one that best suits your needs.

Bottom Line

Life insurance options today are more varied than ever, meaning that people in all stages of life can find a policy option. There are useful insurance calculator tools online that can help you figure out how much coverage you require, and talking to an agent can also be very helpful in determining the right choice. 

Be sure to thoroughly research the plans, rates, riders and customer support reviews online before making any decisions. Life insurance is a smart, but significant investment to make, and it is always wise to take the first step from a place of knowledge.

Disclaimer

*AM Best Rating: A.M. Best's Financial Strength Rating (FSR) is a measure of an insurer's financial strength and ability to pay out claims to policyholders. An "A" rating with A.M. Best indicates that an insurer is considered to be top of the industry in ability to meet ongoing insurance obligations.

Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers – for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products. Coverage amounts vary by state.