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Life insurance can be seen as complicated, morbid and boring. And many people incorrectly think it’s too expensive for them, but life coverage can serve as a vital safety net for your family if the unthinkable happens.
Having life insurance isn’t as common as it was just a decade ago. Only 52% of Americans currently have life insurance. It was 63% in 2011, according to the 2021 Insurance Barometer Study by LIMRA and Life Happens, industry-funded groups.
One of the biggest misconceptions about life insurance is that it’s expensive. You can save on life insurance by comparing life insurance quotes and figuring out exactly what policy works for your situation.
Here’s what you need to know about the basics of life insurance and how to get life insurance quotes.
What Is Life Insurance?
Life insurance is a contract between you and an insurance company. That contract is called a policy. You agree to pay a premium—a single payment upfront or regular payments over time—to keep the policy active. In return, the insurance company will pay a death benefit to your beneficiary if you die while the policy is in force.
The amount of the death benefit depends on how much coverage you choose to buy. Coverage amounts can range from the very small (such as $5,000) to cover funeral expenses to the millions of dollars. You can name more than one beneficiary and designate that each one gets a certain percentage of the payout. You also can name organizations such as charities as beneficiaries.
The more coverage you buy, the higher your premium. Gender, age and health at the time you apply for coverage also affects life insurance quotes. You can lock in a lower quote if you get coverage while you’re young and healthy.
If you wait until you have serious health issues, you might not be able to get a traditional life insurance policy because insurers will consider you too much of a risk to insure.
Why Do I Need Life Insurance?
The primary reason to buy life insurance is to provide a safety net for those who rely on you for financial support. If you were to die while the policy was in force, your beneficiaries would receive a tax-free payout that could be used however they want. That money could help them do the following:
- Pay for your final expenses, such as a funeral service and burial
- Help replace your income so your family can pay bills and daily expenses
- Help pay off debts, such as a mortgage
- Help pay for child care
- Help pay for your children’s college education
Buying life insurance could be worth it because it can allow you to leave an inheritance to your children without having to worry about how you spend your own money in retirement. Or it can be a way to leave a legacy because you can donate your life insurance to charity, organization or cause that is important to you.
Life insurance also can be used as a retirement and tax-planning tool. A permanent life insurance policy typically includes a feature that allows it to build cash value. The cash value grows tax-deferred and can be accessed as a source of extra income in retirement.
However, this strategy typically makes sense only for high-income individuals who have maxed out other retirement accounts. It’s important to consult with a financial planner to find out whether this strategy makes sense for you.
Types of Life Insurance
There are two primary types of life insurance policies: term life insurance and permanent life insurance. And there are a variety of options for permanent life insurance. So it’s important to understand what each type offers before making a choice.
Term Life Insurance
Term life insurance offers a level term period for a certain number of years—typically 5, 10, 15, 20, 25 or 30 years. During this time period your premiums will stay level. The insurer will pay a death benefit only if you die while coverage is in force. The longer the term length you choose, the higher your life insurance quotes.
Term life insurance quotes are much lower than permanent life insurance quotes and can be an affordable way to have coverage in force during the years when your family depends on you most for financial support.
Get A Term Life Insurance Quote
Term lengths available
10, 15, 20, 25 or 30 years
Permanent Life Insurance
Permanent life insurance offers lifelong coverage, as long as premiums are paid. It also offers the ability to build cash value that grows tax-deferred. These features make permanent life insurance quotes much higher than term life. Permanent life also can be more complicated than term life because there are a variety of policy types.
Whole life insurance provides lifelong coverage and a cash value feature. It tends to be the most expensive type of life insurance because it offers a guaranteed rate of return on the cash value, the opportunity to earn dividends from the insurance company, and premiums and the death benefit remain the same over time.
Universal life insurance offers lifelong coverage but doesn’t necessarily have the same guarantees as whole life insurance. Some types of universal life policies allow you to adjust the premium payments and death benefit, within certain limits. And some universal life insurance policies have fluctuating rates of return on the cash value.
- Guaranteed universal life might have little cash value, but the premiums and death benefit remain constant.
- Indexed universal life may offer the ability to adjust premiums and the death benefit. The cash value is tied to a market index, such as the S&P 500, so the rate of return can vary. Indexed universal life policies tend to be complicated and can have high fees.
- Variable universal life offers adjustable premiums and lets you choose how to invest the cash value portion among investment options offered by the insurer. With variable universal life insurance, the rate of return will depend on the investments you choose.
Guaranteed issue is another type of permanent life insurance. It’s geared toward a certain segment of the population: older adults who want a policy that will help pay for final expenses. There is no medical exam, and you can’t be turned down for coverage as long as you meet the age requirements. Coverage typically is limited to $25,000 or less. And the price is high compared with other policies for the coverage you get.
How Much Are Life Insurance Quotes?
Age and gender are two factors that influence life insurance quotes. Here are life insurance quotes from multiple life insurers for someone in excellent health who doesn’t smoke.
Life insurance quote examples for 20-year, $500,000 term life insurance
Factors Used in Life Insurance Quotes
The main factors that affect life insurance rates are your age, gender and health. Women tend to pay less because they live longer, on average, than men. Young and healthy adults will get the lowest life insurance quotes and be able to lock in a good rate for the duration of their policy.
Life insurance quotes will typically incorporate factors such as:
- Your medical history, including any current or past health conditions
- Medications that you are currently prescribed or have taken in the past
- Your family’s medical history (parents and siblings)
- Your driving history, especially DUI convictions, reckless driving convictions or speeding tickets
- Risky behaviors, such as smoking, drinking and drug use
- Dangerous hobbies, such as skydiving
- Dangerous occupations that include hazardous duties
- Financial factors, such as a bankruptcy
- Criminal record
5 Things to Know Before Getting Life Insurance Quotes
Don’t let misconceptions about life insurance hold you back from getting life insurance quotes. Here are a few key points.
- Life insurance may be more affordable than you think. The average cost of a 20-year term life policy with a $500,000 death benefit for a healthy 30-year-old woman is $252 annually or only $21 a month, according to a Forbes Advisor analysis of average life insurance rates. For a male, the average annual rate is $300, or $25 a month.
- The younger you are when you buy life insurance, the less you’ll pay. Your age and your health affect the rate you pay. Waiting to buy life insurance means you’ll pay more simply because you’ll be older. Plus, if you develop health issues, life insurance quotes will be even higher. For example, men buying a 20-year term life policy with a $500,000 death benefit at age 40 instead of age 30 can pay up to 36% more. For women, it’s up to 39% more.
- You might not need a life insurance medical exam. There are plenty of good options for no-exam life insurance. We found multiple insurers that offer up to 30-year terms and more than $1 million in coverage, without requiring a medical exam.
- The application process can be fast and easy. If you’re in good health, you might be able to apply online and get approved for coverage in just a few minutes without taking a medical exam.
- You should compare life insurance quotes from several insurers because prices can vary widely. If you work with an independent insurance broker, the broker will do the comparison shopping for you.
How to Get a Life Insurance Quote
When it comes to buying a life insurance policy, you don’t want to pick a coverage amount or policy length out of thin air. If you do, you could end up being underinsured and could leave your family without a sufficient financial safety net.
Here’s how to get life insurance quotes for a plan and coverage amount that fits your needs.
Step No. 1: Calculate your life insurance needs
The key to determining how much life insurance you need is to understand your financial obligations and your financial resources. You want to buy enough life insurance to cover any financial obligations that your resources won’t be able to cover. You might want more if you want to leave a legacy in addition to providing financial support.
Here are some financial obligations to consider when calculating your life insurance needs:
- Funeral and burial expenses: The median cost of a funeral with visitation and burial is $7,848, according to the National Funeral Directors Association.
- Income replacement: Consider how much of your annual salary would need to be replaced and for how many years (for example, until all of your kids have graduated college).
- Debts you owe: How much would it cost to continue making mortgage payments or pay off the mortgage entirely? Also add in any other large debts that would need to be paid.
- Child care: Your spouse or partner might need to hire someone to care for or transport young children if you’re not around to help.
- College tuition: Consider how much you want to contribute toward your children’s college education and multiply that amount by the number of kids you have.
Consider the following assets or resources you already have to help cover your obligations:
- Emergency savings: Cash reserves can help cover bills or short-term expenses.
- College savings: The more you have saved in a 529 college savings account or other account, the less you’ll need in life insurance to cover the cost of your children’s college education.
- Retirement savings: Funds in a 401(k), IRA or other retirement account could help loved ones cover expenses or be used as a source of income in retirement.
- Existing life insurance: Factor in any existing life insurance policies you might have as resources to cover your obligations. However, be aware that you could lose life insurance coverage you have through work if you leave your job.
- Prepaid funeral costs: If you’ve prepaid for a funeral, that’s one less expense you’ll need to cover with life insurance.
Here’s an easy-to-use life insurance calculator to help you pinpoint your need.
Step No. 2: Evaluate life insurance companies
A life insurance policy is a long-term commitment, so you want to find an insurer with a good reputation who has options that fit your needs at a fair price.
For example, if you are in the market for term life insurance, you may want to consider an insurer’s age limit to renew the policy or your ability to convert it to a permanent policy.
Or, if you want a permanent policy with a cash value component, the best life insurance companies have reliable policy illustrations, low policy expenses and top financial strength.
Step No. 3: Gather your information
You’ll need to provide some basic information for a life insurance quote. This might include:
- General information like weight and height
- Medical history, including current and past health conditions
- Family medical history, such as heart disease among parents and siblings
- Medications you’re currently taken or have taken in the past
Step No. 4: Compare life insurance quotes
The best way to find a good price on a life insurance policy is to compare quotes from multiple insurers. You can get free quotes:
- Online. Most insurance companies offer free quotes on their website. You can visit several insurers’ websites and compare quotes. Or you can save time by using a website that provides quotes from multiple companies.
- By phone or in-person. You can call or visit a local insurance agent who can help you get life insurance quotes. Keep in mind, a “captive” agent only works for one insurance company, so make sure you speak with an independent agent who sells policies from multiple insurers.
How to Apply for Life Insurance
After you’ve gathered your quotes and you’ve chosen an insurer that will fit your budget and needs, it’s time to apply for a life insurance policy. The application process will vary depending on the type of underwriting that is used.
- Full underwriting: This traditional underwriting process requires you to fill out a lengthy questionnaire, take a life insurance medical exam and give the insurer permission to gather information about you from several third-party sources. The process can take up to 60 days, but it likely will result in the lowest life insurance quote if you’re healthy because the insurer will have enough information to price the policy accurately.
- Accelerated underwriting: This process is similar to traditional underwriting but doesn’t necessarily require a medical exam. And it’s faster because it uses data modeling to assess the risk of applicants. Often, you can apply online, the insurer will instantly gather data from third-party sources, and you can get approved for coverage in a matter of minutes. The quotes are comparable to those on fully underwritten policies, but coverage amounts tend to be limited to $1 million.
- Simplified issue: This process for buying simplified issue life insurance is fast and easy. Applicants must answer only a few questions about their health and lifestyle, then insurers will use third-party sources to gather additional information about applicants. No medical exam is required, so insurers often can make immediate decisions about whether to accept or reject applicants. But note that rates are higher for simplified issue policies because insurers have less information about applicants.
While some insurers may require you to take a life insurance medical exam, more and more insurers are able to rely on data modeling to assess risk and allow young, healthy applicants to get no-exam life insurance.
It’s important to take the medical exam seriously because it will impact the life insurance quote you’re offered.Here are the top tips to prepare for the life insurance medical exam:
- In the weeks leading up to the exam: Limit salt intake, drink plenty of water and eat a healthy diet that is rich in whole grains, fruits, vegetables and low-fat dairy products. It’s also a good idea to limit your alcohol intake.
- The day before the exam: Avoid alcohol, nicotine and red meat. You’ll also want to avoid over-the-counter medications like antihistamines and decongestants. A good night’s sleep will help improve your blood pressure.
- The day of the exam: Avoid caffeine, strenuous exercise and drink plenty of water. Make sure you have any necessary documentation, like a photo ID and medical information.
How to Find the Best Life Insurance Policy for You
The best life insurance policy for you will depend on your financial goals and reasons for buying life insurance. So you’ll need to assess your financial situation to figure out what you already have in place to support loved ones who depend on you financially and what needs you should cover with life insurance.
If you want a policy that will provide financial protection for a certain period of time (such as while your children are young), a term life policy will provide the coverage you need at an affordable rate. If you want coverage that lasts a lifetime and provides cash value that you can access while you’re living, a whole life or universal life policy might be a better fit.
Consider working with a financial planner who can help review your situation and figure out what type of life insurance will fit in your financial plan. You can find a fee-only planner through the National Association of Personal Financial Advisors. Or your workplace might offer you access to a financial professional as part of your benefits.
See Forbes Advisor’s ratings of the best life insurance companies.
Life Insurance Terminology
Beneficiary: The person or organization named to receive a life insurance policy payout at the time of the insured’s death.
Cash value: Money that accumulates in a permanent life insurance policy and can be accessed while the insured is alive through a policy loan, withdrawal or a policy surrender.
Face amount: The amount of coverage that is purchased, such as $500,000 or $1 million.
Insured: The person whose life is covered by a life insurance policy.
Death benefit: The amount paid to the beneficiary at the time of the insured’s death.
Policy: The legal document that spells out the terms of a life insurance contract.
Policyholder: Also known as policy owner, the person who owns a life insurance policy. This person is responsible for paying premiums. The policyholder does not have to be the one insured. For example, someone could own a policy on their husband.
Premium: A lump-sum payment or periodic payments made to keep a life insurance policy in force.
Rider: Additional coverage that can be added to an insurance policy (typically at an additional cost).
Underwriting: The process life insurance companies use to gather information about applicants to determine whether to insure them and what rate to charge.
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Life Insurance Quotes FAQ
How do I get an affordable life insurance quote?
The best way to get affordable life insurance is to get a quote while you are young and healthy. That’s because age and health are two major factors that insurers consider when setting rates. The cost of coverage will go up each year you wait to buy life insurance.
Here are 5 ways to get cheap life insurance.
At what age should I buy life insurance?
Buy life insurance whenever you have the need for it. Buying sooner means you can lock in a better rate based on your age and health. Common events that lead people to buy life insurance are getting married, buying a house and having children.
Is life insurance taxable?
The death benefit paid to a beneficiary typically is not considered taxable income. However, there are instances when life insurance is taxable. For example, if you withdraw money from a permanent life insurance policy or surrender the policy for cash, any investment gains on the cash value that was taken out will be taxable. However, if you simply borrow from the cash value, that loan isn’t taxable as long as the insurance policy remains in force.
How do I file a life insurance claim?
You can file a life insurance claim by contacting the policy’s insurance agent or the life insurance company. You need to provide a copy of the death certificate, which you can get from the funeral director, and the insurer will review the claim. Claims are generally paid within 30 days.