How to buy a life insurance policy

Life insurance is not a purchase that you make frequently, so you may not know where to start or how to get life insurance quotes. Here's how to get the coverage you need.

Determine how much life insurance you need

Consider your family's needs and priorities when deciding how much life insurance to buy. Do you have to pay off debts? Will your family have to replace your income to meet everyday living expenses? Do you want to finance your children's college education?

Although you may have some life insurance through your job, it is generally a good idea to have your own policy in addition to the life insurance offered by your employer. The policy through the employer is likely not enough to meet your family's financial needs and usually ends if you leave your job.

Our income and debt replacement calculators can help you determine how much life insurance you need before getting quotes.

Life insurance company evaluation

Life insurance is a long-term purchase, so you want a company that can pay claims for many years to come. The largest life insurers have a long history, but some small insurers also have strong competition. Check the financial strength of insurers with rating agencies such as AM Best or Standard & Poor's. NerdWallet recommends avoiding insurers with an AM Best rating of B or less, if possible.

NerdWallet's ranking of the best life insurances also awards points to companies with the fewest complaints to state regulators.

Not all companies sell the same types of policies, and some focus on specific products, such as life insurance for children. Narrow your options by reading our life insurance reviews and find out what type of coverage you want before you start comparing life insurance rates.

Gather the information you need

Gather the information you need to apply for life insurance or a permanent policy before beginning the application process. You will likely need to provide information about your current and past health status, as well as your family's medical history. The insurance company may need your consent to obtain medical records and require you to undergo a life insurance medical examination. Insurance companies are also checking other data sources, such as the MIB Group, which collect data on medical conditions, driving history, and dangerous hobbies.

You will need to choose the beneficiaries who will receive compensation when you die. Make sure you have Social Security numbers and dates of birth.

You may also need to answer questions about criminal convictions and driving violations, such as a suspended driver's license or a DUI, especially if it happened in recent years.

Compare life insurance quotes

The best way to save on life insurance is to compare all of your options. To find the best rate for you, be sure to compare life insurance quotes from various companies. Prices can vary widely, depending on the type of coverage you choose and personal factors such as age, gender, and health.

If you can, apply when you are in good health

Life insurance companies use average life expectancy as the basis for setting rates. Anything that shortens life expectancy can drive up the price.

Therefore, it is smart to buy a life insurance policy as soon as possible, when you are young and healthy. If you wait, your life insurance rates will increase only because of your age. If new health problems arise, your rates may go up even more.

You can still get life insurance if you have a medical condition. Insurance companies differ in how they view pre-existing conditions, and some types of life insurance do not require a medical exam.

Life insurance frequently asked questions

Who Needs Life Insurance?

Generally, people need life insurance if their death places an economic burden on others. Examples include dependents, parents, homeowners, business owners, and people with joint debts.

How much life insurance do I need?

The amount of coverage you need depends on the amount of money you want beneficiaries to receive. Ten times your annual income is a common estimate, but such rules are not universal and may not reflect your specific situation. Consider your current money and future liabilities, such as income, debt, and daily expenses, when deciding how much life insurance you need.

What is the average price of life insurance?

The average price of life insurance is $ 26 a month, based on the $ 500,000 20-year life policy, which is the most common duration sold. However, life insurance premiums can vary greatly between applicants and policy types. For example, the average whole life policy rate of $ 500,000 for a 40-year-old woman is around $ 400 per month.

How are life insurance rates calculated?

Life insurance premiums are calculated using a variety of factors, including age, health, driving history, policy duration, and amount of coverage. Insurance companies use this information to estimate death rates and then determine your premium based on your insurance risk.

How can I verify the financial strength of a life insurance company?

You can measure the financial strength of a life insurance company with rating agencies like AM Best or Standard & Poor's. NerdWallet recommends looking for an insurance company with an AM rating better than B + or better. The financial strength of an insurance company can give you an idea of ​​how reliably the company will pay a future claim. This is especially important for life insurance because these policies have to last for decades.

What do I need to apply for life insurance?

When applying for a life insurance policy, you will likely need to provide information about your health and even complete a personal exam. You may also be asked to provide details about your lifestyle, hobbies, beneficiaries, and your family's medical history. You should gather as much information as possible before completing the life insurance application to help speed up the process.