Today's Best Life Insurance Rates

What Is Life Insurance?

By: Carol DeMarco

Life insurance provides financial protection for your loved ones in the event of your death. It typically covers funeral expenses, debt repayment, income replacement, and future financial needs. Life insurance providers might deny coverage for fraudulent claims, suicide within set timeframes, or high-risk activities such as scuba diving.

Types of Life Insurance

There are two main types of life insurance: whole life and term life.

Whole life Insurance covers you for life as long as you keep up with the premiums. It accumulates cash value over time, which you can withdraw or borrow against. It also provides a guaranteed death benefit and can be used in estate planning and wealth transfer. However, it typically comes with higher premiums and less flexibility than other insurance options. It may also offer lower returns than alternative investments.

In contrast, Term life Insurance is more affordable and provides coverage for a specified term, such as 10, 20, or 30 years. During this period, you pay regular premiums, and if you die within this term, your beneficiaries receive the death benefit. If you outlive the policy’s span, the coverage expires without any payout.

There are also other types of life insurance worth considering:

• Universal life insurance: Combines a death benefit with a cash value component that earns interest based on market rates.
• Variable life insurance: Invests your premiums in stocks, bonds, or mutual funds. It has the potential for increased returns but also comes with investment risk.
• Indexed universal life insurance: A variant of universal life insurance that links the growth of the cash value to a specific market index’s performance, such as the S&P 500.

Term Life vs. Whole Life: How to Choose

Term life policies offer protection for a specific period — typically five to 30 years — while whole life provides coverage for your entire life as long as you pay the premiums. Generally, term life insurance is also less expensive than whole life insurance.

For instance, a 35-year-old non-smoker might find a 20-year term life policy for $30 a month, while a whole life policy with the same coverage could cost about $200 monthly.

The choice between whole life and term life insurance depends on factors like your age, health, and the coverage amount you need.

When to Choose Term Life Insurance

Choosing term life insurance may be more appropriate if:

• You have young kids and want coverage for their future
• You need to cover a mortgage or significant debts
• You want a budget-friendly option for your working years or up to retirement

When to Choose Whole Life Insurance

A whole life insurance policy, however, might be more beneficial in the following situations:

• You have long-term financial responsibilities, such a providing for a special needs dependent, or estate planning needs that extend beyond a policy’s term
• You want a policy that builds cash value over time
• You prefer having lifetime coverage

The table below compares key features of whole and term life insurance.

Finding the Best Life Insurance Company

Consider these factors when evaluating life insurance policies:

• Financial stability: Assess the insurer’s financial health through credit ratings from agencies like AM Best, Standard & Poor’s, or Moody’s.
• Coverage options: Explore different coverage options like term, whole, or universal life insurance to find a policy that suits your needs, financial goals, and circumstances.
• Premium affordability: Compare quotes across companies to help you find competitive rates.
• Customer service: Research the company’s customer service reputation. Evaluate its responsiveness, ease of communication, and claims process through customer reviews and feedback.
• Policy flexibility: Ensure you can add riders or extras as needed.
• Underwriting guidelines: Familiarize yourself with the insurer’s approval guidelines, especially if you have health concerns.

Learn more about the top life insurance companies.

What Is Group or Employer Life Insurance?

While employer-provided life insurance policies are beneficial, they often lack comprehensive coverage. These policies base coverage on your salary multiples, which might not replace your total income or handle significant financial duties. It’s also usually tied to your employment, meaning you lose your coverage if you leave your job. 

Individual term life insurance is a more reliable choice. Despite the increased costs and separate application processes, it provides customization, better coverage, and stays with you regardless of your job status.

The table below compares employer life insurance and individual term life.

How Much Coverage Do I Need?

To determine the right amount of life insurance, you need to evaluate your current financial situation and anticipate future expenses. Follow these steps to calculate how much coverage you need.

1. Assess your current financial situation: Add your total household income together, including yours and your spouse’s, if applicable. Then, list your monthly expenses, such as mortgage payments, utilities, groceries, and debts. Lastly, evaluate your savings and investments to gain a clear understanding of your current financial position.
2. Consider your future financial needs: Identify your long-term goals, such as funding your children’s education or securing your spouse’s retirement. Next, estimate future expenses while considering factors like inflation and the duration of financial support required to meet those needs effectively.
3. Calculate the coverage amount: Determine the income replacement required to maintain your family’s standard of living. A general guideline is to aim for coverage that’s five to ten times your yearly income. 
4. Determine your coverage length: Evaluate your dependents’ needs and how long they’ll rely on your financial support. Then, assess the duration of your monetary commitments, including mortgage payments and other outstanding debts. Most parents or caregivers opt for coverage that extends until their children graduate from college or become financially independent.

Note that a financial adviser or insurance professional can help tailor a plan to your needs.

Learn more about how much life insurance you might need.

Marital Status and Covering a Family

Marriage changes your life insurance needs. As a single person, you may focus on covering debts, funeral expenses, and potential medical costs. However, you need to increase your coverage to protect your spouse’s financial well-being in the event of death. The more dependents you have, like children or elderly relatives, the more coverage you need.

Consider John (35), the primary earner in a family of four. To secure his family’s future, John decides to purchase a term life insurance policy. His coverage goals are as follows:

Based on these goals, John chooses a term life insurance policy with a total coverage amount of $1.9 million. This coverage ensures John’s family can maintain their lifestyle in his absence.

Alternatively, John could consider getting whole life insurance, which can include special features, or riders, for added benefits:

• Spousal Rider: This addition lets you include coverage for your spouse in your policy. Should your stay-at-home partner pass away, it ensures a payout to bridge any financial gaps created by their lost contributions to childcare or household management.
• Waiver of Premium Rider: With this rider, you won’t have to make premium payments if your stay-at-home partner becomes disabled. This keeps the policy active, providing continued coverage and financial protection for your family.
• Accelerated Death Benefit Rider: This feature offers a portion of the death benefit if your stay-at-home partner is diagnosed with a terminal or critical illness. It provides financial assistance to cover medical expenses during stressful times.
• Child Term Rider: Some policies allow you to include coverage for your children. Should a tragedy occur, you receive a death benefit to help with funeral expenses or other related costs.

How the Life Insurance Application Process Works

The life insurance application process may include the following steps:

1. Online application: Visit the insurer’s website, complete the application, and get suitable insurance options based on your health and personal details.
2. Phone application: Call the number on the company’s website to speak directly with a representative for guidance.
3. Medical exam: Your health status can influence your premium rates. Some policies require a health assessment, which might include a brief home visit by a medical professional or a review of your health history.
4. Underwriting: The insurer evaluates your information to determine eligibility, risk level, and costs. 
5. Approval and finalization: The provider issues the policy once you agree to the terms and costs. Policies usually go into effect after you sign the policy and make the first payment.

FAQs

How much does a life insurance policy cost?

• Life insurance premiums generally range from $20 to $50 monthly, varying based on age, health, coverage, and policy type.

Is life insurance worth it?

• Life insurance’s value hinges on individual needs and financial objectives. If protecting dependents from debts and financial burdens is a priority, then it’s worth considering. A financial adviser can help assess its relevance for you.

Bio: Mario Quijada has over three years of experience in the mortgage field as a loan specialist. With a BA in Business Administration and Finance, he combines his education with industry expertise to streamline loan processes. Mario is focused on guiding individuals toward their financial goals and homeownership dreams.

Disclaimer

*AM Best Rating: AM 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 AM Best indicates that an insurer is considered to be top of the industry in its ability to meet ongoing insurance obligations.

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