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How to Shop for Life Insurance: A Life Insurance Buyer’s Guide

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Finding the Right Life Insurance

Life insurance is an important tool for protecting the financial future of your loved ones. We understand finding the right life insurance can be overwhelming, but with the right guidance it can be easier than you think. To ensure a smooth process and to help you make an informed decision, here’s a quick checklist of what you’ll need to do, which we’ll go over in detail.

Life Insurance checklist:

  • Understanding your life insurance options
  • Finding a policy that best fits your needs
  • Picking the right amount of life insurance
  • Deciding where to buy your policy from
  • Complete the life insurance application process
  • Choosing beneficiaries and payout options

What are the different types of life insurance?

The first step to finding the right life insurance for you is understanding all of your options, which will fall into two categories: Term or temporary life insurance and permanent life insurance.

There are a number of policy variations for both term life insurance and permanent life insurance, all of which are designed to fit the specific needs of a range of unique scenarios.

Term Life Insurance

Term life insurance provides coverage for a specific period of time. This is the “term” of the policy. If the policyowner dies within the set term of coverage, their beneficiaries will receive a check from the life insurance company. Once the term is over the coverage terminates unless you convert or renew the policy.

A term life insurance policy can last anywhere from one year to 40 years with coverage amounts ranging from $50,000 to millions of dollars. For most people, term life insurance will be the best fit and most affordable option to make sure their family’s future is financially protected.

Level Term Life Insurance

Level term life insurance is the life insurance product Quotacy sells most often. With level term life insurance, your premiums remain the same throughout the entire duration of your term length. Meaning, the price you pay for coverage will never increase or decrease.

Decreasing Term Life Insurance

Decreasing term life insurance is a type of term life insurance with coverage that decreases over time as your financial obligations, like a mortgage, decrease. The premium will be a fixed rate, but because of the decreasing coverage you will pay less for this type of policy.

Annual Renewable Term Life Insurance

Annual renewable term life insurance (ART) is a type of term life insurance policy that allows you to purchase one year of coverage at a time. At the very beginning of setting up an annual renewable term life insurance policy, you will lock in a period of insurability.

You can lock in a set amount of coverage between five and 30 years, which you can renew annually with no proof of insurability, i.e. no medical exam or medical questions. During this time frame your premiums are assessed each year and will increase as you get older, unlike level term life insurance.

Return of Premium Term Life Insurance

Return of premium term life insurance is the only type of term life insurance in which you get a refund of your paid premiums if you do not die during the term. As with a traditional term life insurance policy, the premiums you pay are guaranteed to stay level for the entire term of your policy. However, the premiums for a return of premium (ROP) term policy compared to a regular term policy are much higher due to the refund feature.

Permanent Life Insurance

Permanent life insurance provides coverage for your entire life, as long as the premiums are paid. Many permanent life insurance policies have savings components which generate a cash value that you can borrow against as policy loans or withdraw from. Certain permanent policies also pay dividends to policyowners.

Because of the life-long coverage and savings component, permanent life insurance policies are typically 10-15 times more expensive than term life insurance policies.

Whole Life Insurance

Whole life insurance is designed to last your entire life, often has fixed premiums, and accumulates a cash value over time. In general, whole life insurance is the most comprehensive and fully featured type of permanent coverage. This means that it typically has the highest premiums as well.

A whole life policy has the following features: 

  • Dividend Paying
  • Guaranteed for Life
  • Policy Loan Options
Universal Life Insurance

Universal life (UL) insurance is a permanent type of life insurance that trades some of the value growth benefits of a whole life insurance policy in exchange for a lower price and more flexible payment options.

You can choose to have a death benefit that is set or an increasing one, which can be changed if needed. Universal life insurance policies also have a savings component that accrues cash value based on market interest rates.

Guaranteed Universal Life Insurance

Guaranteed universal life (GUL) insurance is one of the least complex types of permanent life insurance. A GUL policy has a set face amount and regular payment. As long as you continue to pay the premium on time, your rate and death benefit are locked in and guaranteed to stay the same.

Indexed Universal Life Insurance

Indexed universal life (IUL) insurance is a universal life policy that accumulates value through investments in a stock market index rather than the typical low-risk investments that most dividend-paying policies use to grow. However, IUL insurance policies guarantee a 0% floor so you won’t lose value, the policy just won’t grow. Because you have more investment options that can be customized, IUL policies will be more expensive than standard (GUL) policies.

Guaranteed Issue Whole Life Insurance

Guaranteed issue whole life insurance is life insurance that offers guaranteed acceptance. You do not need to take a medical exam, answer any medical questions, or have your medical records reviewed. In exchange for this simple guaranteed coverage, the premiums are quite high and the coverage amounts are limited. There is also typically an age range requirement, 50 to 80 being the most common.

Simplified Issue Whole Life Insurance

Simplified issue life insurance is another type of life insurance that you can get without taking a medical exam. However, you do need to answer a few medical and lifestyle questions in order to be approved. It is more expensive than most types of permanent policies, but it is less expensive than guaranteed issue whole life insurance.

Not sure how much term life insurance you need?

Which type of life insurance policy best fits my needs?

For most individuals, a traditional level term life insurance policy is the best option. It’s affordable and can be customized to provide financial protection to your loved ones during the time they need it most.

A permanent life insurance policy is 10-15 times more expensive than term life insurance and in most situations permanent coverage is not needed.

You may benefit from permanent life insurance if you:

Care for a loved one with a disability or special needs.

If you have dependents who will rely on you long-term, a permanent policy will make sure they are financially provided for after you’re gone.

Since the policy doesn’t expire, people with special needs children often choose permanent life insurance. As long as the policy remains active, your child will be able to receive a benefit when you die.

Have a sizable estate.

As of 2019, the estate tax lifetime exclusion amount is $11.4 million. In other words, an individual may gift or transfer up to $11.4 million throughout their entire life time (and at death) without incurring any gift or estate tax. However, if your estate is worth more than this, permanent life insurance can provide money to your heirs to pay estate taxes so they are not forced to sell off parts of the estate.

Are not financially disciplined.

Term life insurance is inexpensive so, for most people, it makes sense to own a term policy and put the difference into savings or investments. However, this only works if you actually save. If you are not great at putting away money, a permanent life insurance policy can force you into saving.

Own a family business.

If you have a family business and not all of your children are interested in taking over, the proceeds from a permanent life insurance policy can equalize an inheritance. The business can be left to the children who are interested and leave the death benefit for the children who are not.

NOTE: We do not recommend purchasing permanent life insurance that doesn’t require a medical exam unless you are not insurable through traditional underwriting. If you’re looking for permanent life insurance and do not want to take a medical exam, first consider the simplified issue option. If you are declined from simplified issue, then consider the guaranteed issue.

Questions? Talk with our experienced advisors.

How much life insurance do I need?

The “right amount” of life insurance is different for everybody. Life insurance is not a one-size-fits-all product. The amount you need depends on your finances, financial goals, and family situation. Your focus should be to payoff sizeable financial obligations like a mortgage and cover living expenses like food and clothing for as long as you can afford.

Buying Term Life Insurance

Term life insurance is temporary and only lasts a set amount of years that you choose. Depending on age and health, common term length options are 10, 15, 20, 25, 30, 35 and 40 years.

A basic solution for your financial needs would be to buy a term life insurance policy in the amount of your largest source of debt. Choose a term length that lasts until you think the debt will be gone. For example, if you have a $250,000 30-year mortgage then consider a term life insurance policy with a face amount of $250,000 and a term length of 30 years.

If you have children, you need to consider the costs of raising them and college tuition, if you plan on contributing. If you die unexpectedly, the death benefit from a term life insurance policy can ensure your children are taken care of financially.

Another option is to determine how much coverage you need and then choose the longest term length you can afford. For example, let’s say you want $500,000 in coverage to cover the costs of your mortgage and children’s college tuition. You have 15 years left on your mortgage and your children will be done with college within 10 years. However, your budget allows you to comfortably afford a 25-year term. Go with the 25 years. You never know what may happen 10 or 20 years from now.

The cost of life insurance increases with age. If you decide later on you need more term life insurance, your premiums will be higher for a new policy. We recommend that you buy as much as you can comfortably fit into your budget while your premiums are the least expensive.

If your financial obligations end sooner than predicted, you can cancel a term life insurance policy at any time. There are no cancellation fees.

If you need help deciding, use our life insurance calculator to see what’s right for you.

Buying Permanent Life Insurance

Typically, if you are buying permanent life insurance you don’t need as much coverage as you would a term life insurance policy. The term life insurance policy can cover your big-ticket items that have an end date, for example a mortgage, and the permanent life insurance policy can provide a small benefit to pay for your funeral or any other end-of-life expenses. Supplementing a term life insurance policy with a small permanent life insurance policy may be the perfect life insurance protection for your situation.

Laddering Life Insurance Policies

Laddering life insurance policies can mean buying more than one policy at a time with varying term lengths and coverage amounts, or it can mean owning more than one policy and purchasing them at different intervals. The laddering strategy is ideal if you have different financial obligations you want to cover but don’t want to pay expensive premiums for one large term life insurance policy.

How do I compare life insurance quotes?

Quotacy term life insurance

Getting term life insurance quotes online couldn’t be easier through Quotacy. Enter a few pieces of information to instantly get cost estimates (no contact information required!).

Enter into the quoting tool your:

  • Zip code
  • Gender
  • Birthdate
  • Smoking status

Then decide how much coverage you need and for how long. As you adjust the sliders you’ll see your price go up or down.

You can apply online in less than five minutes.

If you’re interested in getting a permanent life insurance quote, fill out this short contact form. Permanent life insurance is more complex than term life insurance and one type will be better for you than another. A brief phone call to discuss your insurance needs is recommended if considering a permanent product.

How do I choose where to buy life insurance from?

There are no promo codes or coupons available when it comes to buying life insurance. There are no bundling discounts either, unlike with renters or homeowners insurance.

Life insurance rates are regulated at the state level. This means that the price you pay for a specific policy should be the same no matter what. Whether you buy in-person, online or directly through the insurance company, you will pay the same rate.

The pricing is different across every insurance company and can vary drastically depending on your health or lifestyle factors.

To get the best price on life insurance, you need to shop around, which can be time-consuming. That’s where Quotacy comes in. We make it easier for you to see more options in less time. Not only can you check prices from the nation’s best life insurance companies, you can compare them all at once. No need to jump from site to site.

After you apply online through Quotacy.com, you’ll be paired with a Quotacy agent that will double check the market to make sure you’re getting the best price possible. Plus, they’ll take care of all the legwork during the approval process. Most importantly, Quotacy agents don’t work on commission so you don’t need to worry about being sold a policy you don’t need.

Quotacy is backed by Hallett Financial Group, a life insurance brokerage with over 25 years of experience and long-standing relationships with industry-leading life insurance companies. Because of this, we have the expertise and guidance you won’t find elsewhere in an online life insurance broker.

See prices and compare policies in under 5 minutes

What does the life insurance buying process look like?

1

Compare quotes from top-rated life insurance companies

First, run quotes to get an estimate of what your life insurance policy will cost. Review the policy options and choose the one that best suits your needs.

If you are not sure which policy to choose, we usually advise you to pick the best price. Your Quotacy agent will double-check your policy choice to make sure it’s the best fit for your particular situation.

2

Apply online at Quotacy.com

The online application takes about five minutes to complete. There is a short health and lifestyle questionnaire that you need to complete. Plus, progress is saved so you can easily pick up where you left off.

3

We double check to make sure you get the best price

Your Quotacy agent will shop your case to ensure the life insurance company you chose will offer you the best price on the life insurance coverage you’re looking for. If there is a company that will treat your case, lifestyle and/or any health conditions more favorably, your agent will reach out and explain your options.

It’s your choice whether you want to stick with the insurance company you initially chose or if you want to switch. After you make your decision, your agent will send you a form to sign to complete the application and it will be sent to the insurance company.

4

Complete a phone interview

After we send in your application to the insurance company, one of their representatives will contact you for a confidential phone interview. This should only last approximately 30 minutes.

This phone call is your opportunity to explain answers in your own words. The interviewer will use the call to confirm your identity, and verify policy information and your health history.

5

Complete a medical exam (if needed)

Most life insurance companies require applicants to undergo a simple medical exam. The exam provides the company your most up-to-date health status.

The life insurance medical exam is free, should only take 10-30 minutes, and the examiner will come to your home or office, wherever and whenever is most convenient for you.

6

Review and accept your approved policy

Once the life insurance company reviews your application and any necessary records they will either approve you as applied, offer you a different risk class, or may decline the application. If you are approved as applied this means your initial quote will be your final approved price.

If they offer you a different risk class, your final price will be higher than your initial quote. If this occurs, your Quotacy agent will provide other options for you to obtain a policy that is more inline with your budget. You can go with the life insurance company’s offer, go with a suggestion from your agent, or walk away without any fee or cost.

If the life insurance company declines you, your agent will provide you with other coverage options. These options may include re-applying to a different life insurance company for the same product or trying a different life insurance product that has broader acceptance standards.

NOTE: Don’t forget to keep your policy up to date

A life insurance policy isn’t a set-it-and-forget-it purchase. Just as our lives change, our life insurance needs may change as well.

After purchasing a life insurance policy, it should be reviewed every few years and especially after any major life changing events. Reviewing your policy on a regular basis will ensure you have adequate life insurance coverage and the correct beneficiaries.

What does the life insurance buying process look like?

1

Compare quotes from top-rated life insurance companies

First, run quotes to get an estimate of what your life insurance policy will cost. Review the policy options and choose the one that best suits your needs.

If you are not sure which policy to choose, we usually advise you to pick the best price. Your Quotacy agent will double-check your policy choice to make sure it’s the best fit for your particular situation.

2

Apply online at Quotacy.com

The online application takes about five minutes to complete. There is a short health and lifestyle questionnaire that you need to complete. Plus, progress is saved so you can easily pick up where you left off.

3

We double check to make sure you get the best price

Your Quotacy agent will shop your case to ensure the life insurance company you chose will offer you the best price on the life insurance coverage you’re looking for. If there is a company that will treat your case, lifestyle and/or any health conditions more favorably, your agent will reach out and explain your options.

It’s your choice whether you want to stick with the insurance company you initially chose or if you want to switch. After you make your decision, your agent will send you a form to sign to complete the application and it will be sent to the insurance company.

4

Complete a phone interview

After we send in your application to the insurance company, one of their representatives will contact you for a confidential phone interview. This should only last approximately 30 minutes.

This phone call is your opportunity to explain answers in your own words. The interviewer will use the call to confirm your identity, and verify policy information and your health history.

5

Complete a medical exam (if needed)

Most life insurance companies require applicants to undergo a simple medical exam. The exam provides the company your most up-to-date health status.

The life insurance medical exam is free, should only take 10-30 minutes, and the examiner will come to your home or office, wherever and whenever is most convenient for you.

6

Review and accept your approved policy

Once the life insurance company reviews your application and any necessary records they will either approve you as applied, offer you a different risk class, or may decline the application. If you are approved as applied this means your initial quote will be your final approved price.

If they offer you a different risk class, your final price will be higher than your initial quote. If this occurs, your Quotacy agent will provide other options for you to obtain a policy that is more inline with your budget. You can go with the life insurance company’s offer, go with a suggestion from your agent, or walk away without any fee or cost.

If the life insurance company declines you, your agent will provide you with other coverage options. These options may include re-applying to a different life insurance company for the same product or trying a different life insurance product that has broader acceptance standards.

NOTE: Don’t forget to keep your policy up to date

A life insurance policy isn’t a set-it-and-forget-it purchase. Just as our lives change, our life insurance needs may change as well.

After purchasing a life insurance policy, it should be reviewed every few years and especially after any major life changing events. Reviewing your policy on a regular basis will ensure you have adequate life insurance coverage and the correct beneficiaries.

Who are life insurance beneficiaries?

The whole purpose of life insurance is to provide financial protection for your loved ones: your policy’s beneficiaries. Your beneficiaries will receive a check in the coverage amount of your policy if you die within the policy’s contract limits as long as the policy is active. In other words, the premiums have been paid.

Many individuals buy life insurance to ensure their children are financially protected should a parent die unexpectedly, but don’t name minor children as the policy’s beneficiary. If you name your child beneficiary to your policy and they are not yet legal adults when you die, the court will appoint a property guardian to manage these funds until your child reaches legal age. This court process requires attorney fees, court proceedings, and court supervision of life insurance benefits – all of which take time and money.

If you want the life insurance money to go to your young children, instead name a trusted adult as the beneficiary to manage the money on your children’s behalf. Or open a living trust, name the trust the life insurance policy beneficiary, and a trustee can manage the money on your children’s behalf according to the terms to lay out in the trust. You can also name your minor children as your life insurance policy beneficiaries under your state’s Uniform Transfers to Minor Act (UTMA).

How do death benefit payouts work?

If you have a term life insurance policy, the insurance company writes a death benefit check to your beneficiaries if you die within the term. If you have a permanent life insurance policy, the insurance company writes a death benefit check to your beneficiaries no matter when you die.

The life insurance company will need to be informed of the insured’s death. The beneficiary, or whomever is managing the estate, will need to send in a claims form along with a copy of the death certificate.

You can have more than one beneficiary and you can decide what percentage of the death benefit each beneficiary is to receive. The percentages need to add up to 100. For example, you can list your spouse, adult son, and sister as your beneficiaries with 50% of the death benefit going to your spouse, 30% going to your adult son, and the remaining 20% going to your sister.

It’s important to routinely review your life insurance policy’s beneficiaries and update if needed. Our agents are happy to help you determine the best plan for you. Contact us for a free, no-obligation insurance consultation with one of our experts today.

We’ve got your life insurance questions covered in our life insurance buyer’s guide. Download: The Modern Consumer’s Guide to Buying Life Insurance Online