Topics:Life Insurance 101 buying life insurance final expense insurance tips and advice policy riders business life insurance life insurance facts research
You may find yourself wondering: Is life insurance really worth it? Do I even need it? The answer to these questions depends on what your life looks like. As you assess your life insurance needs, here are six questions to consider: Are your funeral expenses taken care of? What would happen to your debt? Do you have dependents? Are you a dependent? Are you interested in an asset? Do you want to leave a legacy? 1. Are your funeral expenses taken care of? When was the last time you saw a GoFundMe fundraiser for a funeral? The National Funeral Directors Association reported that the median cost for funerals in 2019 were $9,135 for burials and $6,645 for cremations. Ask yourself the following questions: Are your funeral costs taken care of? (You can set aside your own savings, purchase things like burial plots in advance, or work with a funeral home to prepay your funeral.) Can your friends or family cover the funeral costs while waiting for your will to be processed fully? If you answered either of these questions "no," considering a life insurance policy can help your family pay their respects and focus on their grief rather than how they'll fund your funeral. Personal experience Randy VanderVaate president and owner of Funeral Funds, "I learned first-hand the importance of life insurance when my father died on May 10, 2017, without life insurance. When my father died without life insurance, our family had to figure out how to pay for his final expenses, which was emotionally stressful and financially burdensome. This experience reinforced my conviction that people need life insurance if they don't want their family or friends to struggle emotionally or financially after they're gone." Back to List 2. What would happen to your debt? Some debts are shared. Others are not. Review your debt to be sure you understand what debts would become the full responsibility of another or just be collected from your estate if you passed away. If any of your debt would become someone else's responsibility personally or professionally, be sure to have a life insurance policy in place to cover these debts. Personal experience: Business loans Matt Schmidt, Diabetes 365 Founder, "There are many reasons an individual may need life insurance coverage, but one popular example of why you may need a policy is to satisfy obligations for a SBA Loan. Every year, thousands of people will apply for a SBA loan. One little known fact that many are unaware of is that the lender will require a life insurance policy for collateral assignment. I personally went through this process about 10 years ago and got through to the very end before they stated to me that I needed a policy for a specific amount. While I was thrown a little bit off by this requirement, it obviously made perfect sense as to why the lender would require this type of collateral. Being able to find a very affordable life insurance policy was a relief, and ultimately the loan went through without a hitch. Obviously receiving the loan amount was of tremendous use." Learn more about entrepreneurs and life insurance. Back to List 3. Do you have dependents? Whether you work or not, a life insurance policy is especially important if you have dependents. Consider what your partner and dependents would need to replace the work you do. If you provide income for your family, make sure you buy enough life insurance coverage to replace your income. If you are a full-time parent, think about the costs of child care, food preparation, tutoring, cleaning, etc. when deciding how much coverage to buy. Personal experience: Growing family Kelan Kline, personal finance expert and cofounder of The Savvy Couple, "We recently got life insurance when we started to grow our family and felt the need to protect them better if something were to happen to my wife Brittany or myself. Since we run an online business, it's even more important to have all of our ducks in a row with our will and life insurance. We both got policies from Haven Life after shopping around for a bit. We ended up both getting a 30-year term life insurance policy covering us each for $500,000. We also recently set up our will so everything is in place and our family is protected." (Incidentally, Haven Life ranks first on Best Company's list of life insurance companies and agencies. Read customer reviews of Haven Life.) Personal experience: Special needs child Kari Lorz, Head Mama Money Nerd for MoneyfortheMamas.com, "My husband and I have a few different life insurance policies in place, although we didn't intend to do this. We have a very typical 25-year term insurance policy for each of us (different amounts); we did this when we purchased our first home. Term policies are great to bridge the gap until you have enough in savings to be self-insured. My husband is 20+ years military, so he has a smaller policy through an ARMY package as well. We have a 5-year-old daughter together, and she has Cerebral Palsy. We're unsure of her future ability to earn enough income to support her needs. As part of a larger dependant care plan (Revocable Living Trust for us, a Special Needs Trust for her, an ABLE account, etc.), we found we were $1.2 million short of having enough to cover her costs for her lifetime. Hearing that dollar amount was comically sobering (I even laughed out loud a bit when our planner told us our figure). To help bridge the gap, we took out a whole term policy to leave behind significantly more funding. Yet, it still (most likely) won't be enough. A special needs parent's greatest fear is what will happen to their child after they aren't there anymore. I never want her to have to worry about money, so we are doing everything possible to make sure we reach that $1.2 million!" Back to List 4. Are you dependent? If you depend on someone else's income for support, you can buy a life insurance policy to insure their life and name yourself as the beneficiary. If you receive alimony or child support, buying a life insurance policy on the person paying these costs can help you maintain your income and financial stability. Back to List 5. Are you interested in an asset? Permanent life insurance policies grow cash value. The cash value can be used as an asset as long as the policy remains in force. This asset can be useful in some circumstances. However, it should not be your primary reason for buying a life insurance policy, unless you have extra cash lying around. Personal experience Karen Condor, insurance expert for TheTruthAboutInsurance.com, "When my husband and I became engaged in our early twenties, my father-in-law advised us to get life insurance. We didn’t see the point of it given our age, not planning to have children, and not wanting an additional expense. But he kept urging it, so we acquiesced. And he was right, of course: Our life insurance helped 10 years later when we had the opportunity to move from Pennsylvania to California for job promotions. We needed money upfront for moving expenses, with our company reimbursing us after the move. But we were strapped for upfront money since both of us were wrapping up a decade of paying off our student loans, working second jobs to make ends meet. We also didn’t want to dip into what little savings we had, in case of any emergencies. But since whole life insurance builds cash value, we were able to “borrow” the money we needed and repay the account over time at favorable terms. Without having life insurance, I don’t know if we would have been able to accept those better jobs and experience a better life." Back to List 6. Do you want to leave a legacy or pass on wealth? Life insurance policies can be used to build generational wealth because the death benefit is not subject to income tax. If you have extra money and want to use it to buy a life insurance policy to leave your children, it can be a nice way to grow your family's wealth over time. Even if you don't have dependents, you can use a life insurance policy to leave a legacy. Maybe there's a non-profit you care about. You can name this organization as the beneficiary of your life insurance policy. If this is your only reason for buying a life insurance policy, then it's not necessarily a need. Life Insurance Policies and Companies If you need life insurance, check out our top life insurance companies and agencies based on customer reviews. View Top Companies
A life insurance policy reflects long-term commitment. It is a nice gift to give loved ones. Buying a life insurance policy on your life and naming your partner as the beneficiary is a valuable way to show your partner you care about them and their future. You can also consider purchasing a whole life insurance policy for your children. Once they are old enough, you can pass the policy on to them. Using the cash value of the policy can help them pay for school and other life goals. Before you decide to get a life insurance policy as a gift, you need to consider your financial needs and goals. Consider whether or not your family members need life insurance. Work with a trusted financial adviser to determine whether life insurance is a good financial move. Depending on your situation, life insurance may not be a good fit as a gift. For example, if you've only been dating for a week, a life insurance policy is at least overkill and at worst a red flag. (You most likely won't be able to show insurable interest anyway.) Farmers Agency Owner John Williams says life insurance can be worthwhile gift under certain circumstances: "It’s a great gift if it is to cover your loss of income, expenses, and debts for your loved ones. It’s a good gift if your other option is receiving nothing. And it’s a pretty smart gift to protect the future insurability of your children or grandchildren." If life insurance is a good fit for your family's situation, here are eight things to know as you look into buying life insurance as a gift: Start with a conversation. Gather necessary details. Research your options. Evalutate premium costs. Choose a good insurer. Consider insurtech. Know the application process. Ask about policy transfers. 1. Start with a conversation. If you're buying an insurance policy to insure someone else's life, you'll want to have a conversation with them before you start the process. The insured has to provide information for underwriting, and you don't want them to be surprised when they're contacted by the insurer. While this makes a life insurance policy not a surprise, it does show your thoughtfulness and planning. If you're buying a policy for a minor, you'll usually need to understand the applicable rules. Felix Malitsky, Fortis Lux Financial president, identifies a few: "Generally, insurance coverage will be limited to a maximum percentage of the coverage on a parent. All siblings must have an equivalent amount of coverage. The child must be at least 15 days old. Ages 15 and younger need parental sign-off even if the policy is owned by a grandparent." If you're a grandparent, you'll need to have a conversation with your grandchild's parents about buying a life insurance policy. You may be able to make your gift a surprise if you're buying a life insurance policy to insure your life and naming your partner as the beneficiary. Depending on family dynamics, a conversation can still be worthwhile, especially if the person you're buying the policy for will take responsibility for premium payments. Jacob Irving, Willamette Life Insurance Founder, recommends approaching these conversations focused on the value of the policy: "Explain why you are providing this gift. It could be to leave kids/grandkids an inheritance, charity donations, or to provide a lasting legacy. Build a value that you know they will be able to understand and see." Back to List 2. Gather necessary details. Before you apply for a policy, know whose life you're insuring, who the policyholder will be, and who you'll name as beneficiaries. As you choose the policyholder, insured, and beneficiaries, you'll want to avoid the Goodman triangle. If all three parties are different people (even if you name multiple beneficiaries and one is also the policyholder), the policyholder will be subject to gift taxes. To avoid these issues you can work with a tax professional to discuss using an irrevocable trust as the policy's beneficiary. More simply, you can have the policyholder and the beneficiary be the same person or the policyholder and the insured be the same person. (The insured person cannot also be the beneficiary for obvious reasons.) When you apply for a policy, you'll want to have basic information about the insured: name, gender, birthdate, and health history. These details are necessary to complete the application and underwriting. "When buying a life insurance policy as a gift you will also need to know the person you are insuring personal information such as a driver’s license and Social Security number. Finally, make sure you know the health of the person so you can answer the medical questions completely and accurately," advises Manny Lirio, Vantis Life AVP Consumer Direct Marketing. You will also have to provide insurable interest, which shows you have a reason to buy an insurance policy. For example, you can't just buy a policy on your favorite singer. You have to have a familial tie or strong financial connection. "It should be a direct relative, or perhaps even a business partner with a mutual business interest, but should always be discussed with the person who you are purchasing the policy beforehand as they may have to answer questions or have tests done to determine their eligibility," says Duncan France, State Farm Agent. Back to List 3. Research your options. There are many types of life insurance policies. You can find temporary and permanent policies. Some policies are fully underwritten, which means a longer and more thorough application process. Others require a less thorough application and review like guaranteed issue life insurance. Policies can be customized with riders that add benefits or protect your policy. "Some policies accumulate cash value, such as whole life, final expense, or universal life policies, where others, such as term policies, can maximize your dollar but are only in force for a set period of time. Cash value policies can be accessed by the owner of the policy at any time, so keep that in mind when gifting insurance," says France. All of these options can be daunting, so understand why you're buying life insurance and what your needs are. Working with a trusted life insurance agent or agency can also help you explore and narrow down your options to find a good fit. Back to List 4. Evaluate premium costs. "Gifting life insurance is a great idea, as long as you understand that most of the time it is not going to be a one-time gift. You will need to understand the type of policy and the premiums (cost) associated with the policy. There may be annual premiums that will need to be paid each and every year for a set period of time or forever," says Michael Foguth, Foguth Financial Group founder. The policyholder is responsible for covering monthly premiums. If you're the policyholder, know what your budget looks like and how much you can spend on premiums. If you plan to transfer ownership of the policy, be sure you have a sense of how much the new policyholder can afford in terms of the monthly premium. However you plan to handle your gift of life insurance, be sure that you or your gift recipient are prepared for the financial commitment. Back to List 5. Choose a good insurer. Be sure that you purchase a policy from a trusted insurer. A.M. Best rates insurers for their financial strength. The highest ratings are A-, A, A+, and A++. Insurers with these ratings are financially stable and will likely be able to make claims payments. Aside from choosing a financially strong insurer, you'll want to consider the customer experience, particularly when it comes to claims. Read trusted customer reviews and check government sites for formal complaints. If you decide to work with an insurance agent, you'll want to find someone trustworthy and with good experience. Customer reviews and referrals from friends or family can help you with this. It can also be worthwhile to double check that your agent has a license to sell insurance in your state. Top Life Insurance Companies Learn more about your life insurance options by looking at the top-rated companies and their offerings. Learn More Back to List 6. Consider insurtech. Insurtech companies are making applying for life insurance simpler, faster, and more convenient. You can apply for temporary and permanent life insurance policies online. In some cases, you'll need to complete medical underwriting either with a medical exam or with an at-home kit. Most insurtech companies offer policies from highly rated insurers. Before you work with an insurtech company, check the insurer that underwrites the policies for its financial strength ratings. If you're looking for a quick application process, purchasing life insurance through an insurtech company is a great option. Life Insurance InsurTech Companies Learn more about eight insurtech companies by looking at their offerings and customer review data. Learn More Back to List 7. Know the application process. You can apply for a policy by working with a life insurance agent, using an online platform, or working directly with an insurer. However you decide to apply, ask questions about the application process to make sure you understand what to expect. Most online applications are straightforward and user-friendly. However, you should understand how the platform uses your application. Does it stay with the insurer? Does the site allow you to compare policies from multiple insurers? Will your application be sent to multiple insurers or just to the insurer you selected? Does the company keep your information anonymous until you decide to buy a policy? If you're working with a life insurance agent or directly with the insurer, ask questions about how long the process will take and what to expect from underwriting. Back to List 8. Ask about policy transfers. You can change the ownership of a life insurance policy. Be sure you understand how to change the ownership of the policy. Review any tax ramifications associated with transferring policy ownership. This is particularly important if you're buying a whole life insurance for a child or grandchild and plan to transfer ownership to them. You may be required to pay gift taxes, so evaluate your options and plan the transfer with a tax adviser. "The Internal Revenue Service limits the amount that people can give tax free to a child in a particular year. For larger premium policies, a properly structured ownership arrangement allows you to take full advantage of those limits. The policy’s cash value grows on a tax-deferred basis and may eventually be worth far more than your original gift," says Malitsky. If you transfer ownership, you may also pass along responsibility for premium payments. If you want to avoid this situation and the potential of a policy lapsing, One Stop Life Insurance owner Zhaneta Gechev recommends buying a financed policy: "What we recommend is if you want to buy life insurance as a gift, make sure you pay off the policy before signing off to them. There are 10-Pay or 20-Pay policies. For a few extra dollars a month, you will have the opportunity to completely pay off the policy before signing it to the insured. In this case, you would gift them a life insurance policy, without the monthly bill. It will stick and they will appreciate it more."
If you're just starting to shop and apply for life insurance, you've probably got a lot of questions. In this guide, we cover some of the most important questions about term life insurance: What is life insurance? What are my life insurance options? Why term life insurance? What riders should I consider? Do I need life insurance? How do I know if I've got a good life insurance company? What are the best life insurance companies? You'll also benefit from customer reviews and BestCompany.com company rankings. We verify each review before it's posted to our site to ensure that it comes from a real person. Our ranking system is based on an algorithm that heavily weights customer ratings and reviews. You can trust the customer reviews and ratings on BestCompany.com. Buyer's Guide: Term Life Insurance Use our guide to learn more about term life insurance, what to look for in a life insurance company, and BestCompany.com customer reviews and ratings. Download
Updated March 30, 2021. InsureTech companies use technology innovations to make the life insurance quote, application, approval, and purchase processes easier. These companies generally focus on term life insurance. However, a few companies also sell permanent life insurance. Below you'll find a list of 10 InsureTech companies, their product and service offerings, and an analysis of what customer reviews on Best Company had to say about the company. Best Company's customer reviews are trusted because of our guidelines and processes for catching fraudulent reviews through vetting all review submissions. InsureTech companies are making life insurance more approachable and even easier to buy. Use our analysis below to find the company that will best meet your needs. Policygenius Haven Life Bestow Sproutt Quotacy Fabric Ladder Everyday Life Ethos Vantis Life 1. Policygenius Best Company Rank — 1 Best Company User Star Rating — 5/5 (based on 27 reviews) Financial Strength — Policies from insurers with A- or higher A.M. Best financial strength rating. Coverage Levels — Unspecified Type of Policy — Term, whole, and universal Tech Innovation — Online quote, comparison, and application. Licensed agents available to assist with application process. Service information With Policygenius, you can compare quotes and policies from multiple insurers. If you see a policy and rate that you like, you can choose it and provide your contact information to Policygenius. You'll be contacted by one of Policygenius's licensed life insurance agents to complete your application. Policygenius offers realistic quotes based on information you provide. Most of its quotes are within $10 of the final approved rate, so you'll know what to expect once your application is complete. Policygenius's services are free because insurers pay the company when they sell its policies. Company insight Frank Kumpuris, senior vice president of life and disability insurance operations, Policygenius "One feature that sets Policygenius apart from other insurance marketplaces is our emphasis on education. We want people to feel empowered by their financial decisions, so our website houses an abundance of content — from informational guides to surveys to insurance company reviews — to help people get insurance right. We also have proprietary tools, like our life insurance calculator, to help people determine how much coverage they need when shopping for a policy. Policygenius also has a live chat feature — as opposed to only using a chatbot — so people can get their questions answered and have a personalized experience. Our goal is to give consumers a seamless digital experience while maintaining the human contact we all want when making big financial decisions. Policygenius helps you find and secure all of your insurance needs — whether for life, home, auto, disability, etc. — in one place: Online. We’ve partnered with more than forty different insurance companies in our digital marketplace, so people can compare multiple options at the same time and ultimately get the policy that best suits their needs." Customer reviews The most common praise for Policygenius is its customer service: 74 percent of reviews mentioned positive experiences with the company's team. Reviewers appreciated short wait times when calling and proactive communication throughout the application process. Roughly 56 percent of reviews included comments about how easy and smooth Policygenius's process was. Twenty-two percent also discussed how quickly the process went. An easy and fast process helps take the stress out of life insurance shopping. Thirty-three percent of reviews mentioned satisfaction with rates found through the company. This satisfaction is a good sign particularly since Policygenius makes it easy to comparison shop. Customer Review: Stacey P. Gordon from Fort Lauderdale, Florida "I had a great experience with your company. Everyone was friendly and they kept me updated about the application process. You offered the best rate out of all other companies I contacted. Would definitely recommend." Twenty-six percent of reviewers also said they'd recommend the Policygenius to others in their review. This occurence in reviews is worth noting since many reviewers focus on sharing their experience rather than making an explicit recommendation. Note: Analysis based on 27 customer reviews, the total number of Policygenius reviews on BestCompany.com as of March 12, 2021. Policygenius Life Insurance Learn more about Policygenius by reading our analysis and customer reviews. Learn More Back to List 2. Haven Life Best Company Rank — 2 Best Company User Star Rating — 4.8/5 (based on 21 user reviews) Financial Strength — Owned by MassMutual, which earned an A++ rating from A.M. Best. Coverage Levels — Up to $3,000,000 Type of Policy — Term Tech Innovation — View quotes and apply online. Schedule at-home medical exam. Product information Haven Life is one of the early InsureTech innovators. It makes applying for a fully medically underwritten term life policy simple. You can start by getting a quote without providing contact information while seeing what other people pay for a Haven Life policy. Of course, the information provided with these comparisons is anonymous. Haven Life is committed to realistic quotes. It bases its real rate quotes on the information you provide in the application. If you like the quote, you can complete an application online. Once submitted, Haven Life's software will gather underwriting information from pharmacy benefit managers and MIB, Inc. to determine if more medical information is needed before you can be approved for a policy. If more information is needed, you'll schedule an in-home medical exam and answer any additional questions. Haven Life offers an instant decision on eligibility along with a quick and simple way to get fully medically underwritten term life insurance issued by MassMutual. This underwriting process is the most thorough that life insurers use to assess the risk of providing insurance and determine the rate at which they will assume the risk. While it takes time, it typically results in lower monthly premiums. Company insight Adam Weinberg, brand director, Haven Life "Beyond offering a simple application experience, we’re committed to creating meaningful relationships with the families we have the privilege of financially protecting — this is why we offer services like Haven Life Plus. Haven Life Plus is an innovative rider (think: added feature) to the Haven Term policy that helps policyholders live healthier, fuller and more protected lives. In eligible states, customers can take advantage of the following services, which are included in the cost of the policy: Aaptiv — a leading in-home fitness app; policyholders have access to a yearly subscription at no cost ($99 value) Trust & Will — an online solution for creating a legal will at no cost (a $159 value) LifeSite — a secure, digital safe deposit box for organizing and sharing your family’s vital documents; policyholders receive a subscription for themselves and up to five family members ($80 per year) Timeshifter — a travel app that helps to eliminate the symptoms associated with jet lag; policyholders have access to a year of unlimited Timeshifter jet lag plans ($24.99 per year) MinuteClinic® — routine health services offered inside CVS Pharmacy and Target stores; policyholders receive a 15% off discount on any single service Offering innovative services like Plus is one of the main reasons why Haven Life receives such fabulous customer reviews." Customer reviews Roughly 67 percent of reviewers commented on how easy and clear Haven Life's application and approval process was. Twenty-four percent of reviewers commented on its convenience or liked that the initial application was online. Customer Review: Thomas Habib from Hawthorne, New York "As a first time buyer of life insurance, I found the process to be straightforward, thorough and pretty easy. I would highly recommend." Fifty-seven percent liked how quick Haven Life was. Given that Haven Life's process does include medical exams for some applicants, quick is a relative term. For a fully underwritten policy, Haven Life has made the process as fast as possible: Apply online, schedule a medical exam within two weeks, answer any follow-up questions, get approved and purchase. Reviewers also commented on how quick the turnaround was. One reviewer expressed difficulty with scheduling a medical exam and frustration that they wouldn't schedule more than two weeks out. Thirty-eight percent of reviewers mentioned needing to complete a medical exam. Medical exams are common when working with Haven Life. All the reviewers except one commented on the convenience of scheduling an at-home medical exam that took about 30 minutes. Fully underwritten policies usually result in lower premiums than simplified or guaranteed issue policies because the underwriting is much more detailed. Even though working with Haven Life may take longer than buying a policy instantly online, you may be able to save on premiums by taking additional time. Roughly 29 percent of reviewers were happy with Haven Life's rates. The most common adjective used to describe Haven Life rates was great. One reviewer said the rates were affordable. Another one said that the rates were pretty close to the cheapest. While life insurance rates are based on the underwriting process, it's good to know that many reviewers were happy with their policy's rate. Note: Analysis based on 21 customer reviews, the total number of Haven Life reviews on BestCompany.com as of March 12, 2021. Haven Life Insurance Agency Learn more about Haven Life by reading our analysis and customer reviews. Learn More Back to List 3. Bestow Best Company Rank — 3 Best Company User Star Rating — 4.7/5 (based on 13 user reviews) Financial Strength — Policies from North American Company for Life and Health Insurance®, which has earned A+ financial strength rating from A.M. Best indicating financial stability. Coverage Levels — $50,000 to $1,000,000 Type of Policy — Term Tech Innovation — Application and purchase process fully online Product information Bestow offers a simple online process that covers all points of the life insurance purchase process: choosing a policy, applying, underwriting, and buying a policy. The online process is also encrypted, so you can be confident in the security of the information you provide. These simplified processes, including underwriting, makes applying for a term life insurance policy quick and easy. Bestow's process is ideal for people in good health. Bestow's product offerings also reflect simplicity. It offers 10-year and 20-year term life insurance policies. Instead of being overwhelmed by options, you can make your decision based on the term length you want. Company insight Jessica Dolnick, Partnerships and Marketing, Bestow "Simply put, we are one of the fastest and easiest options for purchasing term life insurance! The application process only takes about five minutes and there is no waiting around for a decision or medical exam. We are also the only startup in the space that has our own foundation. We created the Bestow Foundation to help align with our mission: to create a world where every life is valued and protected. A portion of every sale is donated to the foundation. For other companies that offer life insurance, medical exams can be required. In our current environment, many people do not want to invite anyone into their home or go into a doctor’s office. The medical exam requires blood work, so if you are queasy around needles, you don’t have to worry about that with Bestow. One thing that’s really great for the user is that you can get an estimated quote without even putting down your contact information. If you don’t like the price, you don’t have to spend your time filling out additional questions or getting emails or texts for something you are no longer interested in. The application and approval process we offer is 100 percent online, but if you do need assistance, we have non-commissioned agents who can help you along the way." Customer reviews Sixty-nine percent of reviews mentioned how quick the online application and purchase process was. A few reviewers mentioned specific times from five to fifteen minutes. Roughly 54 percent of reviewers commented on how easy Bestow's process was or how easy the website was to use. Twenty-thee percent of reviewers also mentioned Bestow's lack of a medical exam requirement, which contributes to Bestow's easy process. However, the lack of a medical exam also means that some applicants will be denied coverage. Roughly 54 percent mentioned satisfaction with the coverage and rates. Reviewers said rates were affordable, competitive, good, low, or better than what another company offered. These are all great adjectives to hear regarding pricing. Keep in mind, however, that Bestow isn't a good solution for everyone. One reviewer mentioned that they got low prices because of their "excellent health." Another reviewer commented that Bestow was "made for healthy people." If you're in good health, Bestow is a great choice for buying quick, affordable coverage. If you have a tricky health history or a condition like diabetes, you may find better rates and coverage using another platform. Customer Review: Julie from Dallas, Texas "I’m a stay at home mom and this was perfect. Got my policy while the kids were sleeping and it only took a few minutes. Definitely provides peace of mind!" Note: Analysis based on 13 customer reviews, the total number of Bestow reviews on BestCompany.com as of March 12, 2020. Life Insurance Offered by Bestow Learn more about Bestow by reading our analysis and customer reviews. Learn More Back to List 4. Sproutt Best Company Rank — 5 Best Company User Star Rating — 4.6/5 (based on 13 user reviews) Financial Strength — Policies from financially strong insurers Coverage Levels — Unspecified Type of Policy — Term, no-exam term, and guaranteed life insurance Tech Innovation — Online quote, application, and approval (in some cases). Its algorithm uses a Quality of Life Index for underwritting. Product information Sproutt offers a Quality of Life Index. This index uses an algorithm called GAIA (Guided Artificial Intelligence Assessment) to make lifestyle and health recommendations based on medical research. The Quality of Life Index considers sleep, movement, balance, nutrition and emotional health. This index is also used as part of the underwriting process. In some cases, your online application can be quickly accepted and you can purchase a policy in one sitting. When working with Sproutt you can start by exploring your Quality of Life Index or start by getting a quote on life insurance policies. Sproutt offers an easy online quote and application process. Through this process, you'll see policy recommendations based on your responses and pulled from an algorithm that considers policies from many insurers. The matching process is another advantage of working with Sproutt. Rather than combing through many types of life insurance policies from multiple companies, you can view a shorter list of recommendations. Company insight Assaf Henkin, cofounder and president of Sproutt "Sproutt is a new kind of life insurance company that rewards people that take care of their lives with the best customer buying experience and highest value when it comes to available coverage and rates. Based on Sproutt's Quality of Life Index, that uses lifestyle data to better classify customers' health and lifestyle, qualifying customers can buy life insurance completely online and with no medical exams. The advantages with Sproutt include the following: Time and convenience — Qualifying customers can buy life insurance in under 15 minutes, completely online, and with no medical exam. Value — Sproutt assesses customers' health and lifestyle and based on this assessment provides an insurance policy that provides the needed value at a competitive rate. Amazing customer service — Sproutt operates two call centers, for maximal coverage, in New York and Kansas City with expert insurance professionals always on hand to provide the best advice and service." Customer reviews Seventy-seven percent of reviews praised Sproutt's customer service. Adjectives describing Sproutt insurance agents and customer service include "efficient", "helpful", and "attentive." These adjectives and regular praise demonstrate that Sproutt focuses on offering high-quality customer service. Another positive aspect of Sproutt mentioned by reviewers is satisfaction with rates and policy options. These comments appeared in 38 percent of reviews. Customer Review: Jason "Worked with me to find a no-exam term life option that was affordable." Roughly 15 percent of reviewers mentioned the quick process. These comments do not appear in many reviews and your experience may differ depending on your circumstances. However, these positive reviews show that applying through Sproutt can be fast and easy. Note: Analysis based on 13 customer reviews, the total number of Sproutt reviews on BestCompany.com as of March 12, 2021. Life Insurance Offered by Sproutt Learn more about Sproutt by reading our analysis and customer reviews. Learn More Back to List 5. Quotacy Best Company Rank — 13 Best Company User Star Rating — 4.8/5 (based on 33 user reviews) Financial Strength — Policies from multiple insurers that have earned top financial strength ratings from A.M. Best. Coverage Levels — Unspecified Type of Policy — Term and whole Tech Innovation — Online quote, comparison, and application for term life insurance. Licensed agents help complete the process and assist with whole life insurance inquiries and application. Service information Quotacy is a life insurance agency that works to match clients with the policy that best meets their needs. Its licensed agents are experienced and salaried, which means you don't have to worry about upselling or deciding too quickly on a purchase. You can view estimates and quotes for term life policies online from financially strong life insurers, which makes it easier to compare rates and policies across companies. Quotacy is also committed to showing visitors realistic quotes and estimates instead of the lowest possible rates. This level of transparency lowers discrepancies between the actual rate and the quote. You can view quotes online without providing contact information. If you see a policy you are interested in, you can quickly complete the online application process and give Quotacy your contact information. From there, a Quotacy agent will shop your policy to find the most favorable underwriting terms, coverage, and rates for your circumstances. Depending on how the insurer underwrites its policies, you may need to have a medical exam. Quotacy's process isn't instant, but you'll work with life insurance experts to find the best fit. Quotacy clients also benefit from a complimentary LegacyShield account that make it easy to store important financial information, your will, and memories. Having this information in one place makes it easy for your life insurance beneficiaries and dependents to take care of your wishes when you pass away. Quotacy also sells whole, final expense, and guaranteed universal life insurance policies. To compare these policies, you must reach out to Quotacy directly. Quotacy's services are free to you because the company earns money from life insurers for selling its policies. Company insight Abby Reddy, cofounder and CMO, Quotacy "Quotacy is the only online life insurance comparison site that shows quotes from the nation’s best life insurance carriers along with InsureTech companies new to the industry. This allows life insurance shoppers to see prices and compare policies from a robust selection of carriers all in one place and in real time. After applying, Quotacy double checks the market to make sure clients are matched with the carrier that will give them the best price possible and advocate on their behalf from start to finish. Our entire goal is to make sure families are protected with life insurance that fits within their budget. This means that we’re dedicated to helping design policies that fit the specific needs of each family, regardless of how big or small the premium is. Our caring, licensed agents offer unbiased advice, take care of the legwork, and keep customers informed and on track to make the buying experience as easy as possible." Customer reviews Roughly 82 percent of reviewers mentioned customer service. Their experiences were overwhelmingly positive and included satisfaction with communication throughout the application and approval process and praise for the knowledge and professionalism of staff. Only one reviewer was unsatisfied because they worked with an automated agent over the phone. Roughly 58 percent of reviewers were satisfied with Quotacy's process and mentioned it in their review. While the application and approval process is not instant, reviewers liked how convenient it was to work with Quotacy and the clear expectations of how its process works. Forty-two percent discussed the quotes and pricing. A few reviewers (9 percent) mentioned that the pricing after application was different from the initial quote offered by Quotacy. These discrepancies can happen because of how the completed underwriting process assesses risk. However, these discrepancies aren't the majority experience of Quotacy clients based on these reviews. Most reviewers (33 percent) used adjectives like good, fair, and affordable to describe the pricing. Thirty percent of reviews commented on Quotacy's products. To be clear, Quotacy life insurance agents offer services to match clients to the best life insurance policy for their situation. The products themselves are offered by financially strong insurers. Reviewers were satisfied with the selection and quality of the insurance policies and felt that they had found the best option for themselves. Customer Review: Kymberlee Yack from Orem, Utah "life insurance is so important to have incase anything happens to you. quotacy helped us get the perfect plan and perfect coverage so i know if anything happens to me i know my family will be taken care of" Note: Analysis based on 33 customer reviews, the total number of Quotacy reviews on BestCompany.com as of March 12, 2021. Quotacy Life Insurance Learn more about Quotacy by reading our analysis and customer reviews. Learn More Back to List 6. Fabric Best Company Rank — No rank Best Company User Star Rating — 5/5 (based on one review) Financial Strength — Policies from Vantis Life, which is owned by Penn Mutual. Penn Mutual has an A+ rating from A.M. Best. Coverage Levels — Unspecified Type of Policy — Term Tech Innovation — Apply online or through app. Product information Like many InsureTech companies, Fabric makes it easy to apply for a life insurance policy online. Its algorithm also allows applicants to quickly receive a decision on their application without the typical delay for underwriting. What makes Fabric stand out is its app. The app addresses some of the financial planning needs of parents. Through the app, you can apply for life insurance, set-up a 529 plan, create a rainy day fund, and write a will. The app also makes it easy to share policy details and coordinate wills with your spouse. Although the will writing software was developed with legal experts, you should work with an attorney for specific legal advice. Company insight Allison Kade, editorial director for Fabric "A big advantage of Fabric is the ability to offer life insurance without undergoing unnecessary health exams. Using proprietary technology, Fabric approves applicants using an algorithm to help assess their risk profiles. And if someone isn’t approved right away and immediately made an offer to buy life insurance, their application will be sent to human underwriters who will try to approve them without requiring an exam. Additionally, Fabric helps to alleviate the issue of unclaimed life insurance benefits, as that’s a tragedy if it happens even once. That’s why we empower our customers to grant their spouse beneficiaries access to their policy details online and share information with one another. That way, beneficiaries always have access to up-to-date coverage information and a direct way to access Fabric support. Similarly, if you create a last will and testament using Fabric’s free online willmaker, you can share key details of your will with important people such as your beneficiary, legal guardian and executor. We also offer 529 college savings and rainy day savings funds straight through our mobile app, helping families plan for their futures in the most convenient way possible. Now more than ever, it’s critical that parents have the online tools they need to protect their family’s future, without leaving their house (or their couch). Fabric wants to empower parents to build financial strength for their families." Life Insurance Offered by Fabric Learn more about Fabric by reading our analysis and customer reviews. Learn More Back to List 7. Ladder Best Company Rank — No rank Best Company User Star Rating — No rating Financial Strength — Policies from Fidelity Security Life Insurance Company® and Allianz Life Insurance Company of New York. Both companies have earned high ratings from A.M. Best.* Coverage Levels — $100,000 to $8,000,000 Type of Policy — Term with adjustible coverage levels Tech Innovation — Online application. Instant approval if qualified. Ability to adjust coverage level once you've purchased the policy. *Allianz Life Insurance Company of New York has been rated A+ (Superior) — affirmed September 2019 and Fidelity Security Life Insurance Company has been rated A (Excellent) based on an analysis of financial position and operating performance, by A.M. Best Company, an independent analyst of the insurance industry. For the latest rating, access www.ambest.com. Product information Like other InsureTech companies, Ladder offers term life coverage. It offers a quick online application and, if qualified, approval process. Some applicants won't qualify for coverage through Ladder. However, its process is convenient and quick for those who do. Ladder doesn't require contact information before it shows price quotes. You can also see how much different coverage amounts would cost you. This makes it easy to determine whether a life insurance policy through Ladder fits into your budget. If you're happy with your quote, it's easy to complete the application process to see if you're approved. Ladder stands out from other InsureTech companies because its policies are adjustable. You can decrease your coverage at any time, which will also lower your monthly premiums. This feature can help you save money as your coverage needs decrease over time. You can also apply to increase your life insurance coverage if the reverse happens. If you're approved, your monthly premiums will increase. Company insight Samantha Genevay, affiliate manager, Ladder "When consumers buy a life insurance policy, they're covering their needs as they stand today — a mortgage of $X, other loans, young kids, etc. As life happens, things change — you pay down your mortgage, maybe you get a stellar promotion at work, your kids become finally independent, etc. Or, the flip side, you decide to grow your family, you purchase a larger home with a bigger mortgage, you have aging parents to care for, you start a business and take out loans, etc. Whatever it may be, your needs are likely to change over time and yet most insurance policies are geared to be 'get it and forget it'. This leaves policyholders paying the same amount year after year regardless of how their situation evolves. Ladder makes it easy to adjust coverage, all online at any time in a matter of clicks." Life Insurance Offered by Ladder Learn more about Ladder by reading our analysis and customer reviews. Learn More Back to List 8. Everyday Life Best Company Rank — No rank Best Company User Star Rating — No rating Financial Strength — Polices from Legal & General America, whose life insurance companies Banner Life Insurance Company and William Penn Life Insurance Company have earned high financial strength ratings from A.M. Best. Coverage Levels — $100,000 to $2,000,000 Type of Policy — 10–year to 40–year term policies with automated coverage level changes Tech Innovation — Online application and approval; policy coverage levels change according to a formula over time Product information Everyday Life offers its clients personalized policy recommendations and quotes based on their needs. You can view quotes and policy options by using Everyday Life's proprietary Needs Assessment Tool. You can also complete the initial application online. Once you've completed the initial application, an underwriter will call you to complete the application. In some cases, you may need to complete a medical exam as part of this process. What makes Everyday Life's policies standout from other insuretech companies is that its Predictive Protection™ policies are pre-designed to change over time as your coverage needs lower. This preset coverage change means that you can save money on premiums and don't have to think about when you want your coverage level to change. Company insight Jake Tamarkin, cofounder and CEO, Everyday Life "Our personalized, adaptive coverage saves consumers money — from 30 to 80 percent off the total cost of insurance — while giving them confidence they have the right coverage to protect their loved ones. We are the only provider who does this. Our quick and easy needs assessment makes it possible for everyone to analyze their situation and get objective advice, quotes and explore different scenarios, all based on financial planning best practices — for free, in three minutes with no contact info required. Made possible by our breakthrough technology designed to always put the customer's needs first (we aren't hesitant to tell you if we think you don't need any life insurance). We offer simple, convenient, online application, with instant approval in many cases. It's easy on your phone to get from "Get Started" to "Congratulations to Here's Your New Policy!" in less than 20 minutes. People enjoy the simplicity of our self-service experience, with the option to connect with licensed experts (financial planning experts, not commissioned salespeople!) are available if you need us via chat, email, phone, text, but most people enjoy the self-service simplicity." Back to List 9. Ethos Best Company Rank — No rank Best Company User Star Rating — No rating Financial Strength — Polices from Legal & General America, whose life insurance company Banner Life Insurance Company has high financial strength ratings. Coverage Levels — Unspecified Type of Policy — Term Tech Innovation — Online quote, application, and approval. Product information Ethos offers a quick online quote and application process for term life insurance. It focuses on providing reliable quotes, which means that you can trust the pricing you see when you complete the quote process. Once you complete the online application, underwriters will review it and make a decision. Some applicants will need to complete a medical exam as part of this process. Ethos is a fast and simple way to apply for term life insurance. Ethos is not available in New York, so New York residents will need to find another company. Company insight Erica Kolari, communications manager, Ethos "Since its inception, Ethos has been dedicated to dismantling and redesigning life insurance from top to bottom. Ethos built its entire technical stack from scratch, which means that, unlike any other modern startup in the space, it has the benefit of using one advanced system to manage a seamless customer experience. In order to bring the end-to-end customer experience into the 21st century, the company built custom integrations to connect its predictive analytics-driven system to partner providers; in fact, the technical co-founder literally slept in a partner’s office to complete an integration (APIs don’t exist in this world). In turn, Ethos’ application and approval process is fast, easy, and inexpensive (minutes versus 10 weeks), a major innovation when you consider that many carriers still require customers to pay monthly with a paper check. Ethos also applies machine-learning that analyzes customer data to ensure customers are never paying more than necessary for coverage (a practice we call right-sizing), in combination with a customer service team who uses that data and their own knowledge to ensure customers are never paying more than they need to. Roughly 50 percent of the customers who have right-sized policies end up with a smaller monthly premium. This practice is in direct opposition to the traditional model of sales-incentivized methods that are solely focused on making as much money as possible off the individual." Back to List 10. Vantis Life Best Company Rank — No rank Best Company User Star Rating — No rating Financial Strength — A+ from A.M. Best Coverage Levels — Varies by policy. Term: $50,000 to $2,000,000. Whole: up to $1,000,000. Final Expense: $5,000 to $20,000 Type of Policy — Term, whole, and final expense Tech Innovation — Online application and approval Product information Whether you're looking for term, whole, or final expense life insurance, Vantis Life makes it easy to apply and buy a policy online. Most InsureTech companies focus on term life insurance, so the variety is a great benefit. Before you start an application, you must provide Vantis Life with your contact information. If you're still in the research phase, you may prefer to use other quote sites first. Vantis Life's policies do not require much underwriting, which makes the process easy and quick. Remember that the less underwriting an insurer completes, the higher your premiums will be because the insurer considers less information when assessing risk. One especially nice feature of Vantis Life's term and whole life insurance policies is the charitable giving rider automatically included. With this feature, the policyholder can choose an IRS 501(c) (3) nonprofit. When a claim is made, the full death benefit will be paid to the beneficiary and Vantis Life will make an additional donation to the specified nonprofit. The additional donation is one percent of the death benefit. The donation does not exceed $100,000. Company insight Manny Lirio, AVP consumer direct marketing, Vantis Life "There are quite a few advantages to choosing Vantis Life. One of the biggest advantages is our technology. Whether it’s via a desktop computer or a mobile phone, our award-winning quote and application online platform allows consumers to apply for ALL of our life insurance products online in minutes. Our technology also cuts down the time it takes to underwrite. If the consumer is both physically and financially fit, they could receive an offer for life insurance immediately, otherwise, they will receive their offer in only three to five days. Another advantage is the fact that we are the issuing company, not a third party. When customers apply for life insurance they are buying directly from Vantis Life. Unlike many carriers, we allow consumers to pay their initial and recurring payments via ACH or credit card at no additional cost, this way they are financially protecting their loved ones while earning their miles or points." Back to List
Life insurance purchases should be based on your needs. Before buying a life policy, you'll want to carefully evaluate your needs to make sure that life insurance is something you need. To ensure that you get the best advice as you make this decision, consult with a trusted financial advisor. "There are a lot of very smart sounding 'life only' agents or 'advisors' as they refer to themselves that have no fiduciary duty to make sure they put your interests ahead of their own. I would put a large amount of emphasis around finding yourself a fiduciary who is legally bound to do what's right for you without regard to how much commission they will receive if you buy a product through them. The two places you can look to find honest, trustworthy advice are going to be what are referred to 'fee based' financial or retirement advisors, and if you work with an Estate Planning attorney they will likely be able to get you going in the right direction. Both have fiduciary responsibilities to act on your behalf, but nothing is ever guaranteed so you'll still want to do your own homework," recommends Ian Grove, associate advisor for Robert Green & Company. While you set up your meeting, this article can help you start thinking through several aspects that are part of the life insurance decision and purchase process. I reached out to life insurance experts to learn more about what aging adults need to know as they're buying life insurance. If you're buying life insurance for a parent, grandparent, aunt, uncle, or other senior loved one, the expert advice below will help you understand how to evaluate policies to find the best fit for your needs. Do you really need it? How much do you need? What can you afford? What kind of policy should you get? How should you buy it? Do you really need it? report_problem Attention: Most aging adults won't need life insurance. While aging adults don't usually need life insurance, there are circumstances that can make it a good purchase. The questions in this section will help you determine whether or not you need it. Before you work with a life insurance agent or contact an insurer, you should consider whether or not you actually need life insurance or if you just think you need it. "As you get older and into your senior years, it can become less critical to have life insurance. For many people, they have paid off many debts at this stage and no longer have fully dependent children. However, that’s not the case for everyone, and there are still important reasons to at least consider if it’s necessary for your family. If your spouse or a child is still heavily dependent on you for financial support, that may be reason enough to have a policy. There may be a time where it simply no longer makes sense to have life insurance; however, it’s best to carefully consider this every step of the way and make the decision that best fits your life at each stage," says Brett Wilson, Ethos vice president. If you are considering life insurance, here are questions to think through before you buy it: Do you still have dependents? Would your spouse become responsible for paying your debts? Will you need to be in an assisted living or have long term care? How will your funeral be paid for? Are you trying to leave an inheritance? Do you have enough saved for retirement? Do you still have dependents? If you have dependents or a spouse, a life insurance policy may be right for you because it can provide money to pay tuition, living costs, etc. that you would pay for if you were living. Think about your current financial situation, retirement savings, and other assets before purchasing a policy. Charles Read, CPA, and former life insurance agent shares his experience: "I am now a widower and carry no life insurance. While my wife was alive, I carried no life insurance the last ten to fifteen years or so of her life. Why? No need. I have a retirement program that would have kept her in the lifestyle she was accustomed to for her entire life." If you don't have dependents, you may not need to buy life insurance. "When is life insurance desirable? When you have small children that need to be raised. So unless you are a senior raising a grandchild that will need to be brought up and educated if you are not there, why buy a poor investment?" adds Read. search Highlight: If you have dependents, you may want to consider life insurance. Consider your current financial situation and savings. If there wouldn't be enough to care for your dependents if you passed away, you may want to purchase a life policy. Back to "Do you really need it?" Would your spouse or someone else become responsible for paying your debts? In most cases, your outstanding debt will just be paid by whatever amount of cash or assets you leave behind, which will reduce or eliminate any inheritance. But, the bottom line: most of your debt, if it's solely in your name, won't be passed on to your dependents. "What if you have outstanding debt? So what. They can’t get money out of a dead person and your kids are not responsible," says Read. Before you get life insurance to cover outstanding debt, take stock of your debt and understand what would happen to your debt if you passed away. Your debt may not go to your kids, but your spouse or partner may become fully responsible if they're still living. Depending on what the rest of your financial situation looks like, you may want to purchase a life policy to alleviate those burdens. search Highlight: If someone else would take responsibility for your debt, you may want to get life insurance. Again, review your current financial situation and savings. If your debt would be passed to someone else or you wouldn't be able to leave enough for your dependents to live on, a life policy can be a wise purchase. Back to "Do you really need it?" Will you need to be in assisted living or have long term care? While you can't predict the future, you need to think about what health challenges you may face down the road. What are your options if you can no longer live on your own? Do you have children, nieces, or nephews that can help you? Will you need to live in an assisted living facility or pay an aide to help you at home? If you think you'll need assisted living or long term care, understand what your payment options are. You may be in a position to pay for that with savings. If you qualify for Medicaid, that coverage may help pay the costs. You can also look into long term care insurance, but these policies can be expensive and difficult to qualify for. Grove explains why: "The traditional LTC insurance underwriter will look to qualify you on what they call Mortality tables which basically means they are trying to make their very best estimate on how you are going to die or how sick or incapacitated they think you will get when you begin the process of 'moving on.' The later, Mortality table wants to know not how you die but instead when they think you will die. This makes it far easier to get past the underwriters with things like a bad hip or sleep apnea. Next, the cost. Traditional LTC insurance was one of the most expensive coverages you would ever purchase, primarily due to the likely need for a claim. If you make it to your sixties, it's more than a flip of a coin that you will need some type of long term care and the costs can be staggering. Where I live in Napa, California you can expect to pay upwards of 12,000 a month for a decent private room in a care facility." If long term care insurance is out of your budget and you don't have savings to pay for long term care, you may want to consider a life insurance policy with a long term care rider or even an accelerated death benefit rider. "Seniors need to know that more and more life insurance companies are offering life insurance with chronic illness or long term care benefits. A life insurance policy can serve a dual purpose to help provide their beneficiary with a cash payout if they die and/or to help pay for possible long term care or home health care someday. The living benefits mentioned above are available on both term and permanent life insurance," says Gordon Conwell, III, owner of Americanterm.com. search Highlight: Life insurance as a way to pay for long term care isn't a standalone reason to buy a policy. You don't know whether or not you'll need long term care and you may have other options like moving in with a younger family member. If you qualify for Medicaid, it may cover your long term care costs. If you're buying life insurance for another reason, consider a policy that offers an accelerated death benefit or long term care rider. Back to "Do you really need it?" How will your funeral be paid for? While you won't be around to foot the bill for your funeral, you may want to think through how those costs would affect your loved ones and what you can do now to alleviate costs for them. "I carry no life insurance now because why would I need it. My funeral expenses will be paid for. Cremation is less than $2,000, and the VA provides my burial plot and marker. The other reason is funeral expenses so as not to be a burden to your children. Save $5,000 and preplan. Buy the cheap casket that the funeral director would talk your children out of. Flowers, will you care? Give me a break! Here in Texas they can actually bury you in a cardboard box or nothing at all, cheap!" advises Read. While your situation and final wishes may be different from Read's, you should explore your options for covering funeral expenses so that your family doesn't have to worry about it. Before you prepay for your funeral, vet the funeral home carefully. You don't want the funeral home to fold before you pass away since prepaid funerals can't be passed to a different funeral home. Alternatively, a burial insurance or final expense insurance policy will make a cash payout that can be used as the beneficiaries see fit. Just remember that you'll need to make premium payments to keep your policy effective. search Highlight: Life insurance doesn't have to be part of your plan for paying funeral costs. Figure out how much your funeral will cost. Do you have a burial plot already? What do funeral prepay options look like? Would your lingering savings be able to cover expenses? Determine what matters to you, and make a plan to cover those costs. Back to "Do you really need it?" Are you trying to leave an inheritance? Some aging adults may approach buying life insurance as a way to leave an inheritance without paying income taxes. If this is something you're considering, meet with a financial adviser to discuss the best way to move forward. Depending on your situation, you may be better off investing on your own. "Life insurance is a terrible investment as well. Take the same money and put it into a diversified portfolio, you will do much better. Life insurance funds large salaries and big dividends to investors, you get a fraction of what you pay for. They have buildings full of actuaries to make sure. Do you want to leave an inheritance? Save the amount of the premium and invest it, in all probability you will leave more money than the life insurance will pay. The insurance company actuaries know this but won’t tell you. If they do, salaries at the insurance company will have to be cut, including that of the actuary and management," says Read. search Highlight: Meet with a financial adviser before buying life insurance to leave an inheritance. While one of the biggest advantages of life insurance payouts is that they are not subject to income tax, you'll want to talk to a finanical adviser about whether or not this is a good option for your financial situation. Life insurance payouts are subject to estate taxes, so they're not entirely tax-free. Back to "Do you really need it?" Do you have enough saved for retirement? Consider what your retirement accounts look like, how much you'll get from Social Security, and how much longer you plan to work. Do you have enough to cover your expenses? If you have a permanent life insurance policy that accrues cash value, you can use your policy to supplement your retirement income. Keep in mind that your beneficiaries may not end up with a death benefit payout if you use your policy's cash value. "One of the benefits to leveraging these permanent insurances is there is a savings component built into the policy. If designed properly, you can gain the protection the life insurance provides and at the same time have a savings account inside that policy you can access while you're still alive to help supplement your lifestyle in retirement. As attractive as that function is, it is not the main reason most seniors look to fund a life insurance policy," says Grove. Alternatively, you can invest or save what you would spend on monthly premiums to have additional retirement income. search Highlight: Life insurance can supplement your retirement income, but you can invest on your own instead. Supplementing retirement income isn't a good reason to buy a life insurance policy. Remember, whatever cash you receive while living is usually taken out of the death benefit. However, the ability to get income can be an additional benefit to consider if you have other reasons for needing life insurance. Back to "Do you really need it?" Back to Menu How much do you need? If you do need life insurance, you'll want to consider what you can afford and carefully calculate the amount you need. Reviewing the questions in the previous section will help you understand whether or not you need life insurance and why you're buying life insurance if you do need it. Understanding why you're buying a life policy will help you determine how much to buy. "Seniors, like all life insurance shoppers, need to evaluate what a policy will help protect. A thorough needs analysis should be performed to make sure they are not under or overinsured," says Michael Quinn, Life Insurance Blog owner and director of marketing. If you're young and overinsured, there isn't usually much of a difference in premium amounts. It will make a big difference if you're an aging adult. "For a 30-year-old man, the difference between $500,000 and $1,000,000 of 10-year term is less than $10 per month. For a 70-year-old man, the difference per month for the same policy could be $300 or more. By taking the time to correctly assess your coverage needs, you could save yourself thousands of dollars a year in premiums," notes Dennis Ho, cofounder and chief executive of Saturday Insurance. report_problem Attention: Save money by only buying the amount you need. If you don't have a trusted financial advisor, talk to a few life insurance agents to see how much they recommend buying. Getting recommendations from different agents will help prevent you from overbuying and help you find a policy that meets your needs. Back to Menu What can you afford? You also need to buy a life insurance policy that you can afford long-term. If you stop making premium payments, you'll lose your coverage. "Seniors should only buy life insurance they can afford from someone they trust," advises Ross Quade, Insurance Agent and Owner of Prime Mutual. Buying a policy from a trustworthy agent is also important because life insurance is a big financial commitment, and you don't want to be upsold or buy more than you need. As you work with your agent, be clear about budgetary restrictions and any health conditions that may affect your premium rates. Being clear will help them find a policy that fits your needs and budget. "It's also very important to be honest and forthcoming to their agent about their health and other qualifying information. Their agent will be researching which companies they can qualify with based on this information," says Quinn. Keep in mind that what you can afford may change depending on your age and health circumstances. "Seniors should understand that health and age are the biggest factors that play into life insurance. The healthier and younger one is, the cheaper the life insurance policy will be. Seniors should understand that acquiring health insurance before after being diagnosed with a condition will lower their chance of obtaining an affordable life insurance policy or obtaining one at all as most insurance policies require medical exams," says Jasmine Young, MBA, CPA, CFE, and Southern Tax Prep founder and CEO. Back to Menu What kind of policy should you get? There are many kinds of life insurance policies available, each with different features that make it advantageous for certain situations. While some insurers have ages at which they'll stop issuing policies. "The most important thing that seniors should understand about insurance is that options are available. Insurers are much more comfortable offering new coverage older ages today and insurance can be issued to folks as old as 80," says Ho. Term life insurance Key Takeaway: Term life insurance isn't always a good fit. If you're buying life insurance to cover debt, a term policy is a good option because your debt will decrease as you make payments over time. Otherwise, be careful with term life insurance. It may expire before a claim is made. If you renew the policy, you'll likely renew at a higher premium rate. Term life insurance only offers coverage for a set period of time. Term policies typically have lower premiums than permanent ones, which can make these policies attractive. "Term life insurance is the best option for seniors. Term life insurance guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate. As seniors get older, they may have paid off all their debts or their children may become fully independent. In this case, they may not need or want life insurance anymore, and therefore would not want to be stuck with a whole life policy," suggests Wilson. A term policy may work for you if you're primarily buying coverage for debts. If you think you'll need coverage longer, term coverage may not be a good idea. "While it may be tempting to purchase a 10-year term policy to minimize costs, if there is a chance you need insurance longer, you might be better off getting a 20-year term or permanent insurance to be safe because extending your coverage in the future or purchasing another policy may be prohibitively expensive or even impossible if your health changes," cautions Ho. Quade agrees: "For many seniors, it's imperative that the coverage does not expire before they die, which is why term policies are often not the right fit." Whole life insurance Key Takeaway: Whole life insurance may be a good fit for some. If you're in good health, you can take advantage of a fully underwritten policy for lower premium rates on a permanent policy. Assess your insurance needs carefully and consult with a financial advisor to determine if a whole life policy is best for you. Whole life insurance is permanent life insurance coverage. As long as you make your premium payments, you'll maintain coverage with no premium increases. A whole life policy also accrues cash value that you can use while still living. The downside is that these policies are the most expensive type of life insurance. "Whole life insurance is the best life insurance option for seniors. Whole life insurance does not terminate at a specific age like term insurance is designed to do. Term life insurance for seniors often increases in price every five years and cancels after age 80. With whole life insurance, your coverage will last up to 121 years old. Whole life insurance is guaranteed to be there when you need it the most, as long as you keep paying the premiums on time," says Randy VanderVaate, Funeral Funds owner and president. If you're in good health, you may be able to find lower premium rates by buying a fully underwritten whole life policy than a guaranteed issue final expense policy. Before you buy a whole life insurance policy, remember why you're buying life insurance. Is it a permanent need like funeral costs and leaving an inheritance? Final expense insurance Key Takeaway: Final expense insurance is great if you're worried about passing underwriting. If you're buying life insurance to cover funeral costs, a final expense policy works nicely. You can find guaranteed issue policies that do not require underwriting. Remember, this means that you'll pay higher premiums. You'll only be able to buy a low amount of coverage. Final expense insurance is meant to cover funeral costs. "A more popular option for seniors is final expense insurance because they allow for elderly people to obtain an affordable policy without a medical exam. The benefit is smaller, often under $25,000, and can be approved within the same day," says Quade. If you're just looking for a policy to cover funeral expenses or have health issues that would affect underwriting, a final expense policy may be a good fit. These policies offer permanent coverage and level premiums. These policies are sometimes also referred to as burial insurance. "Most of the best burial insurance companies have lenient underwriting for the typical health problems that come with age, such as high blood pressure, high cholesterol, or diabetes are generally accepted for first-day coverage. These whole life insurance plans for seniors are designed to be easy to qualify for and be affordable for seniors on a fixed or limited income," says VanderVaate. As you consider final expense policies, you'll want to keep in mind that only lower amounts of coverage are available with these policies: "Final expense benefit amounts usually max out around $50,000 which will pay for their funeral and other final expenses. Most seniors aren't looking for big policies like when they were in their thirties and needed typical coverage for their mortgage and income replacement," says Quinn. You should also understand that your final expense policy may have a graded death benefit. "Some final expense policies don't pay the full death benefit right away. They can have what's called a graded benefit that might not pay the full amount for a year or two. These types of policies are offered to those with health issues — those who might not qualify for a non-graded plan. If the owner passes away early, then their beneficiaries will only receive the premiums paid into the policy, 10 percent on top for example, says Adam Hyers of Hyers and Associates. But, these policies may not be the best fit for you: "The biggest thing seniors need to know about life insurance is that they shouldn’t settle for the common final expense plans advertised everywhere. These plans are more expensive and have low coverage amounts since they are more accepting of high-risk clients. As a senior, you should go with traditional permanent coverage because you’ll save a ton of money. In addition to that, you won’t have any waiting periods and be able to get much more coverage. So keep the final expense plans as the last resort," advises Mack Dudayev, founder InsureChance Inc. Universal life insurance Key Takeaway: Universal life insurance may be a good fit for some. Universal life policies are typically cheaper than whole life policies. For approval with these policies, you'll go through underwriting. If you're not in good health, you may want to pursue another option. There are several kinds of universal life insurance. Work with your financial adviser to figure out which type is ideal for you. There are several types of universal life insurance. A few experts recommended a guaranteed universal or fixed indexed universal life insurance policy: Guaranteed universal life insurance "For the healthiest seniors, looking for coverage that is $30,000 or above, I would recommend looking into a Guaranteed Universal Life. It is a type of policy that ensures that they would not outlive their policy and when the time comes, they have a policy in place. These policies are considerably less expensive when compared to traditional final expense policies. However, they have more extensive underwriting. Oftentimes they require a medical exam. Again, this is a great option for people with average or above-average health," recommends Zhaneta Gechev, founder of One Stop Life Insurance. Fixed indexed universal life insurance "The best policy to purchase would be a FIUL or fixed indexed universal life policy. The cash value will grow tied to positive stock market index performance, but not fall when the index drops in value," recommends Mark Charnet, founder and CEO of American Prosperity Group. Policy riders Key Takeaway: Policy riders add value, but don't forget why you're buying life insurance. You may want to consider a policy with living benefits like cash value and an accelerated death benefit rider that can help you with challenges as you age. However, remember that the riders aren't the reason you're buying coverage. Focus on finding the best policy for your purpose and budget. Whatever type of policy you decide is best for you, pay attention to policy add-ons called riders. You'll also want to consider other features built into the policies you're considering. "Today, many policies have optional riders that can help you further customize your life insurance to your situation. For example, many insurers offer accelerated death benefit or long-term care riders that allow you to access a portion of your death benefit if you get a terminal illness or need long-term care. For seniors, riders such as these can greatly improve the value of their policy and are worth considering," suggests Ho. Don't get caught up in policy features and riders, though. Remember the core reason you're buying life insurance. Grove cautions: "I think the one biggest factor in all of this is to make absolute sure you've done your due diligence in understanding why you are going to look into the different types of life insurance policies and not get super distracted by one specific feature without weighing what you're sacrificing for that feature." Learn more about life insurance policy riders by reading "7 Common Life Insurance Policy Riders". Back to Menu How should you buy it? You've got several options when it comes to how you buy life insurance. You can work directly with the insurer, work with an independent broker, or buy online. Life insurers file their rates, so choosing one option over another won't find you a better rate from the same insurer. We'll go over each option briefly here. For an in-depth explanation of the pros and cons of each option, read "What's the Best Way to Buy Life Insurance?: What You Need to Know About Buying from an Insurer, Agency, and Online Retailer". If you buy directly from the insurer, you'll limit yourself to the policies and rider offered by that insurer. If you've looked around at a few insurers and have settled on one, then buying directly from an insurer isn't a bad option. However, if you have health issues, you may want to work with an independent life insurance agent or agency. They are familiar with how insurers underwrite certain conditions, which means they can help you find an insurer and policy that fit your needs. "Using an independent broker who offers multiple companies gives them the best chance at getting affordable coverage. This will avoid wasting time applying for companies or policies that may deny or rate them up at a much higher rate," says Quinn. Be careful when you're looking at policies online. Some websites generate leads for companies. If you give these sites your contact information, you'll end up with a bunch of sales calls. If a site won't show you a quote unless you share your contact information, find another site to use. Whatever purchase method you choose, be prepared to spot red flags in insurance companies and agencies. Choosing trustworthy and reliable companies will also help you make a good purchase. Truly understanding whether or not you need life insurance, your options, and what considerations to make will help you make a wise choice for yourself and loved ones.
If you're looking for a way to leave money to your children, other family members, or friends, a whole life insurance policy is a nice way to do that. In addition to leaving money as an inheritance, the policy's death benefit can be used to take care of funeral costs and any other debt. Whole life insurance is expensive. However, its premiums are fixed, so they will not increase or decrease over time. Whole life insurance also offers coverage for a lifetime (as long as you pay premiums) and accrues cash value that you can use as an asset while living. As you consider buying whole life insurance, here are nine things experts say to evaluate before you make a purchase: Advice from your financial adviser Your purpose Cash value growth Policy loan options Dividends Riders Coverage amount Affordability and sustainability Universal life insurance Advice from your financial adviser Whole life insurance is a major purchase with continual monthly fees, so you'll want to carefully evaluate how a whole life insurance policy fits into your overall financial plan. "ALWAYS seek the counsel of a qualified financial advisor. This does not describe most life insurance agents, who do not possess the knowledge or skill to provide comprehensive financial advice," advises Rob Drury, Association of Christian Financial Advisors executive director. Discussing your financial goals, current budget constraints, and why you want a whole life policy with your trusted financial adviser will help you determine if whole life insurance is a good fit and how much you should buy. Back to List Your purpose The second thing you should think about is why you're buying life insurance. "Individuals need to ask themselves what goal they are trying to achieve with the purchase of life insurance. For most, the goal is to provide for their dependents should they pass away prematurely. In those cases a term life insurance policy would make more sense. They are less expensive than whole life policies because they only have a death benefit component to them," says Alan Schoenberger, CFP® and Endeavor Financial Planning founder. If your coverage needs are short-term, then a term life insurance policy may be a better fit. However, if you want to have an asset to borrow from or leave a tax-free inheritance, a whole life insurance policy can be a good fit. Keep in mind, however, that while the death benefit is not subject to tax, it can be taxed as part of an estate. For more tips on choosing between term and whole life insurance, read: "Term Life Insurance vs. Whole Life Insurance". Back to List Cash value growth One advantage of whole life policies is that they typically have a guaranteed growth rate for the cash value of the policy. As you compare whole life policies, consider the rates of return offered by different insurers. Zhaneta Gechev, One Stop Life Insurance founder, also recommends looking at other investment options: "What is the interest rate that the carrier is guaranteeing you? Are you able to have a greater rate of return with a different investment tool?" In some cases, it may make more sense to increase your investment in a retirement plan because of the rates of return, like a 401(k) or IRA. Back to List Policy loan options As you consider investing more of your money in retirement accounts versus investing in a whole life insurance policy, realize that retirement accounts typically have tax penalties for early withdrawals in addition to paying taxes on the withdrawals. In contrast, there are no tax penalties for borrowing from your insurer with your whole life insurance policy as collateral. However, you will need to pay taxes on the loan amount you receive. If you do not repay what you borrowed, the insurer will take the balance from your life insurance policy. Before you buy a whole life policy, you also need to understand the insurer's terms for taking a loan from your policy: "What are the policy loan option details? Different companies have different loan provisions, so it is very important to understand the loan details. One option may be more favorable in certain market conditions, while another option may be more suitable for other conditions. It is important to understand the details and draw out multiple scenarios so that you are not caught by an unexpected surprise in the future," advises Henry Hoang, CFP® Bright Wealth Advisors, LLC. Reviewing these terms with your financial adviser will help you think through multiple scenarios and find a policy that best meets your needs. Back to List Dividends If you're buying a whole life insurance policy, there's an advantage to choosing a mutual insurer over a public insurer because mutual insurers are owned by the policyholders instead of stockholders. Mutual ownership means two things: 1. The insurer only answers to policyholders, so it will make decisions focused on what's best for policyholders without needing to consider stockholder interests. 2. When the insurer's investments do well, it pays dividends to its policyholders. "Because of the guarantees offered by whole life policies, they are underwritten very conservatively; therefore, premiums paid are typically far in excess of the amounts necessary to pay death claims. The excess premium collected by non-participating companies simply becomes additional profit to the insurer. For participating companies, particularly mutual companies that are literally owned by their policy owners, these excess amounts are distributed back to policy owners — either directly in cash, in the form of paid-up additions (additional death benefit), or applied directly toward future premiums," says Drury. If you're going to spend money on expensive premiums, you're better off choosing a mutual company because you'll get any excess back in dividends. "This is why most participating policies can become self-sustaining (no further premium payments needed) at about the 12–15 year point. It is important to note that dividends are dependent upon the actual amounts paid in death benefits, and are not guaranteed. However, most household-name participating companies have consistently paid dividends each and every year of their existence, many for well more than a century," he adds. When you're comparing whole life policies from various insurers, look into their history of paying dividends. How consistently had the company paid policyholders dividends? Does the insurer offer information on how much dividends it paid last year? As you consider potential dividends from your insurance policy, you should also pay attention to how the insurer treats dividends when policyholders take policy loans. Insurers have two methods for treating dividends: direct recognition and non-direct recognition. Direct recognition means that the insurer changes dividend payment rates to policyholders with outstanding policy loans. Non-direct recognition means that the insurer does not change dividend payments if a policyholder has an outstanding policy loan. Reviewing these terms with your financial adviser will help you understand which option would work best for you and give you a better sense of the value you can expect from dividend payments. Back to List Riders You can add policy riders to further protect your policy, add additional coverage, or permit early access to the death benefit. Some insurers include some of these riders as features in their policies. Others allow you to add them to your policy for an additional premium cost. A few valuable riders often available with permanent policies are: Disability waiver of premium — Allows you to maintain your policy without premium payments if you become disabled. Long term care — Allows you to use some of the death benefit to pay for long-term care if you need it. Accelerated death benefit — Allows you to receive some of the death benefit early if you are diagnosed with a terminal or chronic illness. Back to List Coverage amount The most important part of any life insurance policy is how much coverage you're buying. Usually the death benefit should be enough to allow your beneficiaries to cover funeral expenses and any lingering financial obligations. Work with your financial adviser to determine how much you should buy. Since whole life policies are the most expensive, you may want to buy what you can afford and then buy the rest of the coverage in a term life insurance policy. Gechev offers an example: "A father of two small children has $50,000 in whole life insurance only, and he is the primary breadwinner. It is clear that he is way underinsured, but his budget allows him to get only $50,000 of whole life insurance. In this case, he needs to supplement his coverage with a term policy." Back to List Affordability and sustainability Gechev's example leads us to one of the most important factors to consider: the policy's affordability and sustainability. "Whole life insurance can be an expensive option for coverage, relative to other options such as term insurance, in some cases costing 10 times more. Roughly 40 percent of policies are surrendered within the first decade, largely because purchasers overestimate their ability to continue making premium payments for years to come. Unfortunately, due to surrender charges and earlier premiums paying for upfront costs, commissions and admin fees, surrendering a policy within the first few years will likely result in a cash value significantly lower than the premiums paid into the policy," says Jonathan Seif, The ProFolio Group founder. To avoid surrendering your policy, follow Drury's advice while you're still in the decision-making phase: "Prioritize financial planning objectives within your budget. This will help determine how much money is available to pay life insurance premiums. Whole life is often the most cost effective option, but if the premium is too high, it may be appropriate to purchase some or all term insurance that has an option to convert to permanent coverage when the budget allows." If you're considering buying some whole life insurance and supplementing it with term life insurance, read "10 Things to Consider When Buying Term Life Insurance" for more expert tips. You should also consider what would happen if you suddenly lose your job and have trouble finding a new one. Would you still be able to maintain your life insurance policy? What safeguards can you put in place through personal savings to avoid losing your policy? Remember: you're playing the long game with these policies. Back to List Universal life insurance Because whole life insurance is typically the most expensive kind of permanent life insurance, you may want to consider other permanent life insurance options. Universal life insurance offers many of the same features as whole life insurance. However, the rate of return on the cash value is not guaranteed and the premiums are not fixed. Depending on the kind of universal life insurance you buy, you may have more control over where your insurance policy is invested. These policies are cheaper because you assume more risk. In addition to a whole life insurance policy from a mutually owned insurer, John Hill, president of Gateway Retirement, recommends the following types of universal life insurance: "The second recommendation is a Fixed Indexed Universal Life insurance policy, which is designed to grow your money without loss because of the market and could become tax-free income later in life. This is the 7702 policy from the IRS tax code. You want to spend your money wisely. For seniors, I would recommend a GUL, guaranteed universal life policy. It is like a term to 100. With some companies, you can take money out of the face amount for critical and/or chronic illnesses." Gechev also recommends a guaranteed universal life policy. "A guaranteed universal life insurance policy is a type of product that could be designed to give you guaranteed coverage up to age 121, the same as whole life insurance. The key differences are that it does not build much of cash value but oftentimes could cost a third of a whole life policy," she says. As you evaluate your options in the context of your financial situation and long term goals, be sure to get the advice of a financial planner. Taking your time through this process will help ensure that you make a good choice for yourself and loved ones. Life Insurers and Permanent Policies Learn more about life insurers and their permanent policy options by looking at the top-rated companies and their customer reviews. Learn More
Big purchase decisions must be weighed carefully — you've got a lot of money on the line. Life insurance is one of those big purchase decisions that can help you or your family maintain financial stability. Buyer's Guide: Term Life Insurance Download our free guide to learn more about term life insurance, how to decide if you need it, tips for choosing a life insurance company, and customer reviews. Download Guide As you consider buying term life insurance, here are 10 things experts say to consider before you make a purchase: Your need Your purpose Coverage amount Term length Policy riders Affordability Age and health Underwriting Purchase method Advice from your financial planner Your need As you're considering this purchase, you should evaluate how much you need a life insurance policy and if a term policy meets those needs. Jake Tamarkin, Everyday Life CEO and cofounder says, “Contrary to what some old school industry hacks may tell you, life insurance is not for everyone. However, it's a critical financial planning tool if you have a loved one who depends on your support to maintain their standard of living, particularly: Spouses/partners Underage and special needs children Elders and other adults you care for Co-signers of some private student loans (check with your provider — most but not all will actually cancel your debt upon borrower's death or permanent disability)." If you've got people who depend on you financially, you'll probably want a life insurance policy. Don't ignore other ways people depend on you. "Consider both the financial and caregiving support you provide your loved ones. If you were gone tomorrow, would they have the resources they need to replace that support?" advises Tamarkin. Don't forget that you can buy a life insurance policy on someone you depend on. For example, if you cosigned loans for someone and wouldn't be able to pay them back if they passed, you can buy a policy to insure their life with yourself as the beneficiary. Term insurance is a great fit for this example because you likely only need coverage until the loans are paid off. In addition to considering who depends on you, you'll also want to consider your financial obligations. "You may need money for your mortgage, a college fund, or income for those left behind if you were to pass. Knowing how much you will need for a mortgage is easy, but a college fund will take some planning — and don’t forget to factor for inflation. Income needs can be calculated by finding what it takes to run your household, multiplied by the number of years you want to cover," says John Hill, president of Gateway Retirement. As you're evaluating your life insurance need, you should also consider funeral costs and final expenses. These are quite expensive, with the most recent medians being reported as $7,360 for burials and $6,260 for cremations from the National Funeral Directors Association. The only drawback to using term life insurance for this purpose is that it will only provide a death benefit for a certain period. Once the term finishes, you won't have coverage. In these cases, a permanent or final expense policy may be better options. Though, most final expense policies are available to people nearing seniorhood. Once you know what your life insurance needs actually are, you'll be able to tell if a term life policy is the best fit for you. Back to List Your purpose Once you understand your life insurance needs, you'll have a clear purpose for buying life insurance. “When you’re trying to decide between a term and permanent policy, ask yourself: Are my financial obligations temporary? Think: A mortgage, student loans and college tuition. If your responsibilities have an end date, term life insurance is your best bet — and as a bonus, it’s the cheapest and most straightforward policy," advises Katia Iervasi, insurance writer for Finder.com. Knowing why you're buying life insurance gives you more direction through the buying process. Back to List Coverage amount How much coverage you buy really depends on your needs and purpose. Nick Kolbenschlag, Crown Wealth Group managing partner, identifies good questions to think through as you decide the amount of coverage you need: How much debt do I currently have? What goals for my family would need to be funded if I passed (ex: kid’s college education, spouse retirement)? What monthly income would my family need to maintain their current lifestyle? How many years would they need to maintain that before using their retirement assets? What amount would I like to pass to the next generation? Once you've considered these questions, you'll want to do some calculations: "Multiply the monthly income need by 12 months and then by the number of years needed, add to it your debt balance, the goal funding needs and the legacy amount to get to the death benefit (face value) needed at this point in time. We then determine the number of years we need the coverage in place (term)," says Kolbenschlag. Life insurance is an important purchase, so you need to make sure that you're buying the right amount. "Getting this question right is critical and too many agents and buyers don't put enough effort into getting this right. The work is worth it, because this is the biggest driver of both the ultimate cost of your coverage as well as the peace of mind that you are fully protecting your family," says Tamarkin. It may be easier to buy a single policy for the largest amount your family would need. If your family needs less, it's not like they wouldn't appreciate having more. However, doing so can restrict your monthly budget. "For example, imagine you are buying life insurance to support your newborn child until they graduate from college. That's perhaps 22 years of your after-tax income you need covered today. But in 10 years, you will only need 12 years of your income covered. You can save 30–60 percent of your cost by stacking a couple of smaller policies that step down over time, rather than buying one big policy that leaves you overinsured and overpaying down the road," advises Tamarkin. Another advantage of planning this way is that if your financial circumstances change, and you can't afford all of your life insurance policies, it's easier to drop one policy while still maintaining some coverage for your family than it would be if you lost the only life insurance policy you had. However, if your needs increased over time, you'd have to buy an additional policy. Buying life insurance can be a hassle because of the underwriting process, but it's doable. You'll also have more flexibility with your monthly budget if you only have the coverage you need, not more than you'd need. Back to List Term length You'll need to decide how long you want to have a life insurance policy in place. Knowing why you're insuring yourself or someone else can help you determine the length of coverage you need. "Always ask how long you will want or need coverage. Keep in mind that if you need coverage beyond the level term period, (i.e.15, 20, 30-year term) you may have been better off not purchasing term but rather permanent insurance," advises Raquel Murphy, Vice President of Individual Life Insurance with HUB International Northeast. Keep in mind that your needs may change overtime, which can affect how long you need a policy. If you're buying the policy to protect your family, how long will that protection matter? For example, if you just need the additional protection while your partner finishes school because they'll be able to support themselves well afterwards, you may just want a policy that covers those years. Of course, you can always buy a longer term than you think you'd need to play it safe, too. Back to List Policy riders Life insurers often offer riders with their policies. These riders offer additional coverage or help protect your policy. A few common examples include: Disability waiver of premium — If the policyholder becomes disabled, they can maintain the policy without paying more premiums. Accidental death rider — If the insured dies in an accident, the beneficiaries will receive an additional sum as part of the death benefit. Accelerated death benefit — If the insured has a terminal illness or chronic illness that meets the terms of the policy, a portion of the death benefit can be received before the insured passes. An accelerated death benefit is a kind of living benefit that can be added to some insurance policies. Here are a few specific to term insurance: Term conversion — You can convert the term policy into a permanent one without going through a new underwriting process. Watch out for the timing and deadlines for doing so. Return of premium — Once the policy term is over and a claim wasn't needed, the policyholder can be refunded their premiums for the whole policy. Renewable term — You can renew your policy at a new premium rate when your initial policy's term ends. Keep in mind that the premium costs will generally be higher when you renew. Some insurers include these features with their policies, other insurers offer them as options. Adding riders to your policy will affect your monthly premium costs for a policy. However, if these riders are important to you, it can be worth paying an increased premium. If you're buying a term policy because that's what you can afford right now even though you'd prefer to have a permanent life policy, choosing a policy with term conversion can help you maintain your coverage permanently in the future. It's also advantageous in case new health issues arise. "If you're healthy, a new term policy might be less expensive, but converting an existing term should be considered by anyone with health complications. Underwriting for the new policy is based on your original underwriting, not what you would currently qualify for," says Zachary Paschke, insurance agent and Term Life Guidance founder. It's also helpful if you're buying term insurance at an older age: "Before you buy a new term policy, see if you can convert your existing policy into a GUL (Guaranteed Universal Life) policy. These policies work much like a term policy. Instead of selecting a term (number of years) you select the age you want to coverage until. These policies are often available until age 80–121 depending on the company. I've saved clients huge amounts of money converting policies into GUL policies. One client came to me looking for a 20-year term policy in his late fifties He converted an existing policy and got more coverage until age 121 for less money," says Paschke. If your policy has a term conversion feature, make sure you understand what the terms of the conversion are. Checking will help ensure that you don't miss the deadline to convert your policy into more permanent coverage. "Check your conversion terms in your policy well before your policy runs out! Terms vary by carrier. If you're buying a policy now that will expire around your sixties be looking for a policy with top notch conversion terms. This is rarely something people ask agents about, but could save a ton in the future if you need it. It's an insurance policy for your insurance policy," recommends Paschke. Back to List Affordability Of course, the bottom line will be what you can afford to pay in monthly premiums. If you are unable to make premium payments, you'll lose your life insurance policy and will need to buy a new one later in order to have coverage. "What can I afford? In this question, don’t push too hard. You want to be comfortable with the cost," says Hill. The good news is that you'll likely be able to afford more coverage with a term life policy than with a permanent one. Because the coverage is limited to a set amount of time, term policy premiums are often much less expensive than permanent insurance premiums. Back to List Age and health As you consider what you can afford right now, you'll also want to think about how your situation may change over time and affect future life insurance choices. "Every insurance policy is bought based on your assumptions. If you get a 10–20-year term policy, you are assuming you will be able to afford another policy financially and health-wise at the end of the term. Life insurance is based on your age and health to qualify. The older you are, the more a policy will cost," says Hill. If you develop health conditions, you may also see increased premiums or even be denied coverage. If your policy has a renewable term rider, that can be advantageous. However, there are limits that can make this unfeasible. Back to List Underwriting Underwriting is how insurance companies determine whether or not they will insure you and at what cost. Many factors are considered during underwriting. Even when you buy term life insurance, the kind of policy you buy will affect how thorough the underwriting process is. "Fully underwritten insurance is much, much cheaper but may require a medical exam depending on your situation and the carrier's risk appetite. If a provider promises in their marketing material that no medical exam will be required, you can be sure they are charging you more for the incremental risk they are taking, and the extra cost can be huge," says Tamarkin. If you'd rather have a simpler underwriting process or no underwriting at all, you can opt for guaranteed issue policies. Just know that you'll pay for that convenience with higher premiums. "People must understand that if they outlive those 20 years, they're likely to have an annual renewable term rider automatically which means the cost will increase from year 21 on up until they can't afford it anymore. The price at year 21 will equal to whatever age they're at. As an example, a client with one of the companies I write for at 30 years old, non smoker at standard health would pay $22 per month for $250,000 for 20 years. At age 50, the price would jump to $80 per month. Still doable but after another 20 years, if they reapplied and got that price, it would be impossible to get due to the price for a 70 year old," says Justin Ehrhardt, TheBeardedFinancialPro.com. Weigh future health developments, increasing age, and your future financial position as you determine the length of your policy and what riders you'd like to have as you decide what kind of underwriting you prefer. Back to List Purchase method When you're buying term life insurance, you can work directly with an insurer, work with an independent agency, or even apply and buy it online in one sitting. We'll review each option briefly here. For a more detailed analysis with insight from insurance experts, read "What's the Best Way to Buy Life Insurance?: What You Need to Know About Buying from an Insurer, Agency, or Online Retailer." Buying directly from an insurer will help you establish a point of contact there in case you ever need to update your policy if you move or want to change your beneficiaries. You will, however, be limited to the policies and underwriting guidelines offered by that insurer. Generally speaking, underwriting guidelines are very similar across companies. However, some companies will underwrite medical conditions like diabetes more favorably than others. A few of Best Company's top-rated insurers include Northwestern Mutual, Prudential, and National Life Group. Working with an independent agent or agency is advantageous because they represent multiple insurers, which means you can compare your options across companies to find the most favorable policy that meets your needs. While some agencies have a local focus, others offer their services broadly and connect with clients online. A few examples include Quotacy and Policygenius. Keep in mind that agents do not charge their clients because they earn commission from the insurers they represent for the policies they sell. Even though independent agents are less biased than the insurer representatives, make sure you work with an agent that you trust to avoid being pushed into a policy that may not be the best fit for you. It will usually take a little bit of time to be approved and issued a life insurance policy if you work with an agency or insurer, especially if your policy is fully underwritten. If you'd like to have a policy in place quickly and don't have any underlying health concerns, you can view quotes, apply, and buy a term policy online. A few examples of these companies are Bestow and Fabric. The only downside is that you may end up paying higher premiums compared to fully underwritten policies. If you're buying life insurance online, keep in mind that many of these companies are newer and have not stood the test of time compared to other insurers. Find out if another reputable insurer offers the policies or if the insurance policies are insured. You don't want to buy a policy only to have the insurer be unable to pay a claim to your beneficiaries. Back to List Advice from your financial planner Before you buy a term life insurance policy, it's worth sitting down with a financial planner to discuss all of your options and the best way to move forward. Depending on your goals and situation, a permanent life insurance policy may make sense. "Are there better choices for your money? You could get a permanent policy and have your money work for you. The term policy does not have cash value like a whole life policy does," says Hill. Maybe you want to leave an inheritance for your family through a permanent life insurance policy. "Do you prefer to leave a fixed amount or a potentially larger investment? When choosing a policy, it is important to consider which of these options you'd like to leave for your heirs. While a policy that is investing for you will most likely pay off a higher amount, this isn't always the case. If you happen to die earlier than anticipated, a fixed amount is more likely to pay higher. This is a question to ask yourself when you consider your long term health prospects,” says Ty Stewart, Simple Life Insurance CEO and President. Permanent life policies are much bigger commitments than term life policies. Permanent policies usually have much higher premiums and offer lifetime coverage as long as you make your premium payments. You should weigh a decision to buy whole life insurance even more carefully than buying term life insurance. If you're considering a whole life insurance policy, see our article "9 Things to Consider When Buying Whole Life Insurance." However, if you can already tell that a term life insurance policy is what will best meet your needs, start exploring top life insurance companies and read customer reviews on Best Company. Life Insurers and Term Policies Learn more about life insurers and their term policy options by looking at the top-rated companies and their customer reviews. Learn More
You've got a lot of options for buying life insurance. You can buy it by working with an independent agent or agency or directly from the insurer. The internet has also changed the life insurance buying process — now you can buy from popular quote websites, connect with an agent or agency online, and even buy directly from an insurer online. "Armed with more information and price transparency, consumers are in an excellent position to pick their term life insurance 'vendor.' I use the term 'vendor' here because, in 2020, it’s not necessary to meet in person with an agent to get guidance on how much life insurance to buy — online calculators and quote engines abound," says Chris Acker, CLU, ChFC of CB Acker Associates Insurance Services. While buying term life insurance online is more common, some sites also allow you to apply for permanent life policies online. To evaluate the pros and cons of each life insurance shopping method, we'll start with the more traditional methods of buying life insurance and then cover online life insurance shopping. Work directly with the insurer Work with an independent agent or agency Buy life insurance online Work directly with the insurer You can always work directly with a life insurer to buy a policy from them. Many insurers have their own life insurance agents who can help you through the process. Some insurers like Northwestern Mutual also offer financial planning services. If you're already working with one of their financial planners and trust them, it can be convenient to work with your financial adviser to determine how a life policy fits into your broader financial goals and apply for a life insurance policy. While you can't get a better deal by working with the company directly, working with an independent agent, or shopping online, there are still some disadvantages to working directly with an insurer. The company's agent will only give you insurance policy options available through that insurance provider. If you want to compare insurance policies from multiple insurers, you'll be doing all of the legwork yourself and may not receive unbiased advice from each insurer's agent. If you have some health concerns that will affect your premium, it may be in your best interest not to work with insurers directly. "Each insurer has different underwriting guidelines, and rates can vary wildly. To score the lowest rate, compare a bunch of term life insurance quotes," says Katia Iervasi, an insurance writer at Finder.com. Working with an independent agent can help you find an insurer that underwrites your condition more favorably than others — even for permanent life insurance policies. As you compare, be sure to note how the policies from each insurer differ because there may be slight differences that affect the overall value of the policy. However, it can be nice to cut out the middleman to work directly with your insurer if: you don't have health concerns you already know which company you want to work with you are confident in your ability to research, evaluate your options, and make an independent choice Work with an independent agent or agency Instead of working with an insurer directly, you can find an independent agent who works with multiple insurers. If you work with an independent agent or agency, you can be more confident that you're getting help finding the right fit. You can choose a policy from any company, and the agent will still have made a sale. The other nice aspect of working with an independent agent is that it has no cost to you. Independent agents and agencies are paid by the insurers they represent. While there are lots of perks to working with an agency over an insurer, notice any signs that your agent is pushing a specific policy or company on you. Since agents are paid by the insurance companies for the policies they sell, rates can vary by product or insurer. Agents should be able to present quotes, benefits, and drawbacks of each policy and insurer in an objective manner and leave the final decision to you. Buy life insurance online The convenience of the internet makes it a popular tool for life insurance shopping. The internet can help you research insurers and their policies, compare quotes, connect with agencies, and even buy term policies online. With all the advantages of convenience, keep these pitfalls in mind: Seeing unrealistic quotes Sharing contact information Buying from limited online options Seeing unrealistic quotes Often insurance quote websites and even some insurers will show the lowest premium rates available. These quotes may not be the rates that most people qualify for. If you are seeing surprisingly low rates, approach these numbers with some skepticism and anticipate that your actual rate will be higher. If you're using a quote website that asks for some underwriting information (e.g. age, gender, health, and tobacco use) before it shows you quotes, you can have more confidence in these numbers. Two online insurance agencies have a strong commitment to providing potential clients with realistic quotes: Quotacy and Policygenius. This commitment is one reason these companies are worth using as part of your life insurance research and purchase process. Even if the final rate is not the exact quote you received, it will usually be close to the mark. Sharing contact information Before you share your contact information with any website, you should know how the site uses the information you provide. Do they keep it confidential? Do they send your information to many insurance companies? Do they only send the information to the company you asked about? Understanding how sites use your information will protect you from getting a crazy number of phone calls from salespeople trying, as they may say, "to earn your business." Fortunately, whether you are comparing companies or looking for quotes, there are sites that respect your information including Best Company, Quotacy, and Policygenius. Best Company doesn't offer quotes. However, you can read customer reviews and see how companies rank against each other based on industry criteria and customer reviews and ratings. If you choose to use a company by clicking on a Best Company "Visit Site" button, the only company that will receive that information is the company you selected. We save you the frustration of unending sales calls in this way. On Policygenius and Quotacy's platforms, you do not have to provide contact information before you can view quotes. If you decide you want to work with either company, you can share contact information with them after you see quotes. Quotacy agents keep your information anonymous as they work with insurers to find a policy that best fits your particular needs with a favorable underwriting process. This practice offers an additional layer of security as Quotacy shops around to find the best life insurance options for you. Policygenius also only shares your information with the insurer you applied for through its platform. Buying from limited online options If you're mainly using online resources to connect with reputable agencies and view quotes, you're not buying from limited options. However, if you're planning on completing an online application and purchase in the same sitting, you cannot buy a permanent life insurance policy and you're limited to a few kinds of term policies. "When you buy online, you're limited to the simplified issue and guaranteed issue policies, which are quick and easy to buy but don't involve much underwriting. This is usually bought by people who have medical conditions, so they are much more expensive. That means you won't get the best rate because the insurance company will charge you the same as these unhealthy people. Although it will take longer, the best route to go when buying term life insurance is through an insurance agent. You will go through underwriting and get the best rate available," says Brian So, life insurance agent and Brian So Insurance founder. Online policies are also not as customizable as policies bought through more traditional methods. "There are a string of fintech insurers that can issue term life insurance policies online, including Bestow, Ethos, and Haven Life. They offer a quicker buying experience and your coverage might go into effect instantly — but just know you may not be able to add riders to your policy,” says Iervasi. If riders are important to you, then buying life insurance online may not be the best way to go. You should also keep in mind that some of these companies are new, so don't have a lengthy time in business to demonstrate their longevity. Before you buy from these companies, make sure you understand how they protect the policies people buy — Is the company a subsidiary of a trusted insurer? Does the company have insurance on its life insurance policies? "An increasingly popular model is where a life insurance company develops specific policies for the non-medically underwritten marketplace and re-brands the site with all new products. You see this with Haven, for example, which is owned by MassMutual," says Acker. Another similar example is Bestow. Bestow's policies are from North American Company for Life and Health Insurance ®, which has earned high financial strength ratings. These policies are also reinsured by Munich Re. Even though Bestow is a new company, you can buy confidently from it because of the steps it has taken to ensure its ability to meet claims obligations. While these new companies can be trusted, buying life insurance online isn't a great fit for everyone. Raquel Murphy, HUB International Northeast Vice President of Individual Life insurance offers a few examples: "Buying term life insurance online seems easy and convenient unless you have a problem. There will always be an agent behind the machine that you are referred to if you don’t meet the narrow criteria for applying online. If you have a medical condition or have a family history of medical conditions, purchasing on the internet may not be for you. Also, if you are purchasing very large amounts of term insurance, then you should probably speak with an agent." What's the verdict on online life insurance shopping? It can be a great tool for researching policies and connecting with agencies or insurers. However, applying and buying life insurance instantly is not for everyone because the options may be limited, you may not qualify, or you may overpay on premiums. Choose the best method As you consider your options for buying life insurance, you should consider the pros and cons of each and which would make the most sense for your situation. Working with a life insurer cuts out the middleman and establishes a connection to the insurer that you can contact as you need to make changes to your policy beneficiaries or update your address. However, the life insurer will only show you policies that they offer. If you choose an insurer without understanding how they approach underwriting certain conditions, you may pay higher premiums than with another insurer. If you want to explore your options at multiple top insurers, working with an independent agent or life insurance agency is a great choice. Agents represent multiple life insurers and can help you find the one that offers the most favorable underwriting for your situation. This is another advantage of working with an agency, especially if you have medical conditions that would affect underwriting. You can also connect with some agencies online to buy term or permanent life insurance policies. Quotacy and Policygenius are good examples because they allow you to view quotes without providing contact information and, in many cases, start the application process online. Licensed agents are also available to help you as you navigate the application and purchase process. As you consider purchase methods, you don't have to worry about being given a different price for the same policy from the same insurer whether you work with an agent or with the insurer. "Seeing as insurance laws do not allow for premiums to be greater when an agent is involved we recommend utilizing an agent that specializes in planning to ensure the policy fits into your overall strategy," says Todd Burkehalter, Drive Planning CEO. If you want to apply and buy a life insurance policy online in one sitting, you're limited to some kinds of term insurance. Convenience is a huge advantage of these policies, but they're not for everyone. If you're trying to get the lowest premium or have health conditions that affect underwriting, you'll want to choose another purchase method. However, if you're in good health and just want to check life insurance off your to-do list, there are reliable companies to choose from, including Bestow and Haven Life. Whichever way you choose to approach life insurance shopping, be sure to avoid pitfalls and choose an insurer with high financial strength ratings. "Insurance companies are heavily regulated and among the least likely institutions to go under, so I advise clients to not worry as much about which particular carrier they work with so long as they are A-rated by A.M. Best or the other ratings agencies. This information is readily available on a company's website and pretty much all you need to know," says Jake Tamarkin, Everyday Life CEO and cofounder. High ratings indicate an insurer's ability to manage its finances wisely and meet claims obligations. If an insurer has unpublished or low ratings, it's best to choose another company. Buying life insurance will give you peace of mind and help your loved ones be financially prepared for the future. Want to know more about the pros and cons of life insurance agencies and quote comparison websites? Read: "Life Insurance Brokers vs. Quote Comparison Websites."
No one wants their friends and family to inherit financial difficulty. Life insurance can go a long way in alleviating financial stress, from paying for a funeral to replacing a lifetime of income. You want to leave your family financially secure at an affordable price. Premiums and coverage are what you'll look at as you compare policy options from trusted life insurers. First, we'll take a quick look at life insurance rate classes, then move on to cover some of the biggest things that can affect your premium rate, and finish with additional advice from experts. Rate classes Life insurers have 14 to 16 classification levels that determine premium rates. The rate classes with the lowest risk include the following: Preferred Plus or Preferred Best Preferred Standard Plus or Standard Select Standard If you have a higher than standard risk, the rate classes extend into tiered tables that are either numbered or lettered in order. Table 1 is the least amount of additional risk. “Some companies go down to a table 12, while most will decline after table 10. The closer you are to Preferred Best, the lower the premium you will pay. Every table rating increases your premium by 25 percent. For example, a table 1 will be standard + 25 percent, table 2 will be standard + 50 percent, etc.” says Chris Abrams, Abrams Insurance Solutions owner. Your premium rate is determined based on what classification you reach based on underwriting. Through the underwriting process, the insurance company will review your application, health, lifestyle, and a few other factors to determine the risk of insuring you. Once the underwriting is complete, you’ll know whether your application has been approved or declined. If you’ve been approved, you’ll also get the final premium rate. If you think you may have higher than standard risk, don’t worry. You may be able to find an insurer that handles your situation well. “Some companies offer 'table shaving' which means they will reduce the amount of tables if you have other favorable underwriting factors,” says Abrams. Premium rate factors There are many things that affect your premium rate. Before even getting to the underwriting process, the amount of coverage and policy type affect the rates you’ll see and the level of underwriting you can expect. “The death benefit amount you choose and the duration of your policy both materially impact your premium level. The greater your death benefit and the longer your policy period, the higher your premium will be,” says Andrew Chen, Hack Your Wealth founder. Longer policies aren’t just likely to cost more. They’re also likely to have more rigorous underwriting. “Whole or permanent life insurance policies tend to be more expensive and an insurance carrier is going to want to know about more aspects of a person’s life. Short term policies for a lower amount may not require as much information. It really depends upon the carrier and the type of policy,” says Walt Capell, Workers Compensation Shop founder. Another factor that can affect what you spend on premiums that isn’t part of underwriting is the payment schedule. “Most people pay monthly or quarterly premiums for their life insurance. Insurers typically charge a fee for the premium modes. Pay annually and it could reduce your cost by as much as 10 percent,” says Richard Best, Don’tPayFull.com personal finance expert. Some insurers may offer some flexibility on premium payment schedules. If you are a disciplined budgeter, opting for a bi-annual or annual payment schedule can make a lot of sense. Underwriting factors If you’ve done some shopping around, you’ve probably found that you have to provide some information about yourself before you can see a premium quote. “Life insurance rates are initially driven by three factors: age, gender, and tobacco usage,” says Doug Mitchell, CLU, Ogletree Financial Services owner. Once those factors are considered, more health, lifestyle, and criminal record information will be considered. “An applicants age, answers to health and lifestyle questions and their financial well-being are the biggest influencers in the underwriting process and will determine what the premium will be,” says Manny Lirio, Vantis Life Insurance Company, AVP of direct to consumer marketing. Here’s what experts had to say about age gender tobacco and other drugs driving and criminal record health lifestyle For more information on how life insurers find information on you, read Cameron Huddleston's Forbes article "How Life Insurance Companies Get Intel On You." Age Katia Iervasi, Finder.com insurance writer“Younger people almost always pay less for life insurance. The reason isn’t subtle: As you age, your life expectancy goes down, and the likelihood of your insurance company having to pay out your policy goes up.” John Holloway, NoExam.com founder and licensed agent“In 2019, NoExam.com conducted a life insurance pricing study. The study recorded the results of over 100,000 life insurance quotes, and it shows that the price of life insurance increases with age. On average, the price of life insurance is 65 percent more expensive at age 40 than it is at age 30, and it is 96 percent more expensive at age 50 than it is at age 40. The good news is that you usually require a shorter term policy at age 50 than at age 30. The bad news is that you will have a bigger payment to budget for each month.” Life Insurance Premium Price vs. Insured's Age Graph showing results of NoExam.com's study results. Image courtesey of NoExam.com. Back to Underwriting Factors Gender Laraine Sookhoo, OneHourBurialInsurance.com life insurance agent“Life insurance companies underwrite based on gender at birth.” Andrew Chen, Hack Your Wealth Founder“Women generally live longer than men, so they'll have lower premiums on average.” Katia Iervasi“Men are considered to be riskier drivers, so women tend to score lower rates.” Back to Underwriting Factors Tobacco and other drugs Katia Iervasi“To enter the top rate tiers, you’ll typically need to show you have no history of alcohol or drug abuse or treatment within the past 10 years.” Smoking Andrew Chen“If you smoke, you'll pay higher premiums because the risk of death within the policy period increases.” Alex Enabnit, TermLife2Go.com licensed agent and life insurance expert“One of the biggest considerations for your premiums is whether or not you smoke. Insurance companies are typically pretty hard on smokers (and even vaping gets included in this category). It’s not uncommon for a smoker to pay at least double the amount that a nonsmoker in the same health class would pay. The good news is, the longer you go without smoking, the more it can lower your premiums. Most insurance companies consider a person who hasn’t smoked in five years a nonsmoker — even if that person smoked for thirty years before then.” Laraine Sookhoo“Life insurance companies consider a ‘non-smoker’ as someone who has not had tobacco or nicotine products for at least 12 months. This would include nicotine replacement products like patches and gum. Of the ten insurance companies that I represent, none of them are asking specifically about electronic cigarettes, but some phrase the question to cover nicotine products and others do not. A couple of my insurance companies will give cigar smokers the non-tobacco price because they only ask about cigarettes.” Marijuana Emory J. Smith, Principal of EJS Financial Management “Marijuana use is a hot button issue in life insurance. Five years ago, almost no carriers would offer coverage for users of marijuana. Today, many carriers will offer excellent, non smoker rates for admitted marijuana users. In states where medical marijuana is legal, carriers typically underwrite based upon the underlying condition. Why does the proposed insured have the medical marijuana card? Underwriters will ask for copies of the card to prove legitimacy and often extend favorable nonsmoker rates to applicants. Some carriers go so far as to distinguish between smoking, vaporizing and using edibles. The frequency and method of marijuana consumption can change an applicant’s offer. By and large, many life insurance carriers still view marijuana in any form as an illegal drug and decline or highly rate coverage accordingly.” Prescriptions Emory J. Smith“Part of most insurance applications is a prescription drug database search on the proposed insured. Many clients don’t realize such a database exists where all prescriptions, dates and prescribing physician’s information is listed. Whether intentional or unintentional, this search can turn up additional medical information not previously disclosed. I had an applicant disclose back pain issues with ‘occasional’ use pain medication only to find six active prescriptions for the same intense pain medication on the database search. Needless to say, this rose to the level of abuse, and he was justly declined for coverage.” Back to Underwriting Factors Driving and criminal record Katia Iervas“Safe drivers are viewed more favorably by insurers. To score a cheaper rate, your driving record must be free of moving violations, DUIs and reckless driving in the past three to five years.” Richard Best, Don'tPayFull.com personal finance expert“Life insurers take a look at your driving record. Too many tickets or at-fault accidents may get you a higher premium rating.” Jared Weitz, United Capital Source CEO and Founder“If you have a criminal record, especially that of driving under the influence, your insurance policy will be more difficult to qualify for. The level of detail the process covers can be invasive, but is vital to getting adequate life insurance that matches your lifestyle.” Laraine Sookhoo“Lifestyle choices can affect pricing in that they force the buyer into a higher rate classification. Those with substance abuse issues, convicted felons, and those with a DUI in recent years may be denied or else approved at a higher rate. Since insurance fraud is always a concern and because life insurance policies are sometimes used to try to launder money, an insurance company might also deny an applicant if their reports indicate possible character issues that raise flags about these potential problems. They wouldn't affect price, though, just approval.” Back to Underwriting Factors Health Richard Best“The biggest factor in determining how much premium you pay for life insurance is your health condition and history. This factor includes your family's health history. Insurance actuaries determine which health conditions present the biggest risks and apply premium ratings accordingly. Each company applies different standards to assess risk, which is why it’s important to compare rates of different insurers.” Current health Adam Hyers, Hyers and Associates, Inc. owner and insurance agent“The number one factor in determining rates are conditions with higher mortality rates. Any conditions associated with an earlier death will be cause for higher premiums or no offer of insurance at all. Actuaries and underwriters are very careful with chronic conditions that may reduce someone's life expectancy.” Travis Price, licensed income protection agent“Obesity plays a major role in determining your rating class. The higher your BMI, the more likely that you're going to be in a higher rating class or even denied. This is true even if your health is perfect except for your weight.” Laranie Sookhoo“Life insurance companies care about the kinds of illnesses that will lead to an early DEATH. They don't care if you have medical issues that make you uncomfortable or affect your quality of life. So, things like back pain and knee pain are of no concern UNLESS these are issues because you have a disease like Lupus or MS. If your back or knee hurt due to an injury or arthritis, then it won't matter. Rheumatoid arthritis is a concern, however. Diabetes is not usually a problem if it is controlled, but if it is uncontrolled and the applicant has already experienced complications like an amputation or needing kidney dialysis, then that person will need to apply for a guaranteed issue policy.” Personal and family health history Andrew Chen“If you or your family has a history of illness that increases the risk of death during the policy period, you'll pay higher premiums.” Brian So, Brian So Insurance founder“Your medical history plays a huge role in qualifying for life insurance. If you've had major illnesses in the past (e.g. cancer), the underwriter would want to know more about it. He may gather more information from your family physician or specialist. If the underwriter determines that you are at a higher risk for death than the average person in your age range, it will add a rating to your policy or decline your application for coverage.” John Holloway“An applicant's health history is going to have the biggest impact on premiums. Any current or past health conditions can have an effect on the rate. Some things that people are often not aware of that can affect an underwriting decision are: past medications, current medications, driving record, family medical history, and medical history. These factors can cause the applicant to be moved into the next rate class, which will mean a higher rate. In some cases, applicants are declined for a combination of these factors. For example, untreated high blood pressure combined with a family history of heart disease.” Medical Exam Andrew Chen“You'll have to take a health exam as part of the underwriting process. Your health assessment from this exam will impact your premium.” Travis Price“For those cases that are fully underwritten, the medical exam has the most influence over the premiums you pay. In the event that you go to a simplified issues policy, the MIB (Medical Information Bureau) is vitally important. It gives essential information and prescription checks to determine eligibility and rating classes.” Back to Underwriting Factors Lifestyle Jared Weitz“Your health and lifestyle will play a large part of the underwriting process. If you’re an avid bungee jumper or travel to dangerous places often this will place a burden on your rate.” Job Andrew Chen“If your job is a risky or hazardous one (e.g. police, pilot, construction worker vs. office worker), then you'll likely face higher premiums.” Hobbies Brian So“Factors that negatively affect your insurance premium include participating in high-risk avocations like skydiving and heliskiing, use of narcotics, incarceration, and major driving infractions. These will all make the underwriter think twice before offering you insurance coverage.” Andrew Chen“If you have unnecessarily risky hobbies, like freescaling or skydiving, you'll face higher premiums.” Travel Emory J. Smith“Foreign travel to ‘safe’ countries for less than 183 days (six months) per year is generally okay. Foreign travel for longer than 183 days is typically categorized as Foreign Resident status which limits available rates at most carriers. As a rule of thumb, any country where the U.S. State Department has a travel warning is likely not eligible for life insurance through traditional channels. Foreign countries are rated with letters. A-rated countries such as China, Canada, France, United Arab Emirates allow for best possible rates up to 183 days of travel. Lesser rated countries like Iran and Ukraine are still eligible for coverage, just lower rates and shorter durations of travel. It goes without saying, but travel to countries with active conflict generally results in decline of coverage.” Back to Underwriting Factors Life insurance applications Applying for a life insurance policy can be intimidating, but understanding how the process works can make it less daunting to secure financial stability for your loved ones. Before you apply for a policy, make sure that you’ve explored your options and have found the right policy fit. You’ll also want to do your research to know when you’re working with a trustworthy life insurance agent and to choose a reliable insurer. Whether you’re figuring out which kind of policy is best for you or starting the application process, here are some extra tips that experts offered. Choosing the right policy Laraine Sookhoo“A term life policy is a good solution for parents of young children in the home because their goal is income replacement. Buyers of this product certainly hope that the term will expire without them needing to use it. (Just like we buy auto insurance and hope we never need it.) This is very different from someone who buys a final expense policy, who hopes that they still own the policy on the day they die because they want their heirs to have that money to help pay for their funeral and other end-of-life costs. Savvy business people often buy larger whole life policies because they can borrow tax free from the cash value accumulated to help them with their business or real estate goals. Some buy universal life policies in an effort to combine insurance and investing. If you are clear on the life problem you are trying to solve, it will help you determine which policy might work best for you.” Finding the right insurer Chris Abrams“There are hundreds of life insurance companies in the United States. Work with an independent agent who is familiar with how each company underwrites certain health conditions. That agent should be able to match you to the one company that will be most lenient for your particular situation and therefore will offer the best health rating/lowest premium.” Completing underwriting Scott Butler, Klauenberg Retirement Solutions financial planner“People should know that underwriting is usually, at worst, a very mild inconvenience. You may have to do a paramedical exam, but the insurance company will pay for it. Think of it as a free health check-up. The examiners usually have flexible appointment times and will usually come right out to you. When you are being asked questions about your medical history, pay attention to each question, answer truthfully and do not volunteer any extra information that is not asked for. If they want to know if your mother had a medical condition before age 65, there is no obligation or benefit for you to tell them about conditions your mother had after 65 or about conditions of your sibling.” Walt Capell“Each carrier has their own formula for how they determine if they are going to offer coverage and how much to charge for that coverage. For most people, making small changes such as losing weight, quitting smoking or adopting a healthy lifestyle to lower your blood pressure and cholesterol can help lower premium when quoting a life insurance policy.” Earl Rubinoff, The Rubinoff Group president and CEO“A constant annoyance is when an insurance company receives copies of medical records of a person and there are notes in the applicants records that describe a recommendation for the person to go see a specialist or have a specific further medical test performed to rule out any issues and the patient hasn't followed through on this. This is a very simple item that the life insurance applicant can control. People have to realize the more information the insurance company has, the better the rate the person can get.”
Here are two scenarios you may face as an entrepreneur: Scenario 1You've got a great idea. You just need some funds to put it in action, make profits, and be a successful business owner and entrepreneur. The only thing standing between you and starting a business is some funding. SBA loans are a nice way to get funding. The Small Business Administration partially insures loans given by banks and other lenders. Because the loan is insured, the risk for the lender is lower. However, SBA loans require life insurance for the business owner can take on the loan. The death benefit from the life insurance policy would cover the remaining balance of the outstanding loan. Scenario 2You realize that most of your business’s success depends on you, your business partner, or one of your employees. If that person gets sick or passes away, your business would be negatively affected. Depending on your business goals and the kind of business you have, you may want to purchase key person insurance that will help your business stay solvent, recover from the loss, or pay employees severance as the company closes. As you start your business, you may also want to consider key person life insurance that can help keep your business solvent in the event that a person directly tied to the success of your business passes away. Whether you're looking for key person insurance or life insurance for loan collateral, here's what you need to know about how much to buy and what kind of life insurance to buy. How much life insurance to buy Life insurance coverage is the cash the insurance company pays you when you make a claim. This is called the death benefit. When you're determining how much to buy, think about how much you would need for expenses if the insured person were to pass away and the purpose of the life insurance policy. SBA loans For SBA loans, you'll need to have enough to pay off the balance of the loan as required by the lender. “The first step is to consult with your loan officer at the bank writing your SBA loan. The loan officer will know the specific requirements for the life insurance policy you need. Typically, the lender will require a 10-year or 25-year term policy with the death benefit that is the same size as the loan. You should also find out your closing date to help the insurance agent determine when the policy needs to be in place by. With this information, you can then move on to choosing a life insurance policy,” says Jason R. Hill, FSS Client Focused Advisors CEO and financial adviser and Life Insurance for SBA Loans founder. Keep in mind that you may need life insurance policies for your business partners if you’re not the sole founder. “In the case of business co-founders or multiple principle revenue-creators, you likely will need a policy on each person,” adds Jason Fisher, BestLifeRates.org CEO and founder. Once you know how much life insurance the lender requires, you’ll be prepared to work with the life insurance company to find a policy that meets your needs. “Often life insurance policy terms and amounts won't precisely match what you need, so you'll want to choose a larger coverage amount and longer term than the SBA loan. That way, in the tragic event the policy does need to be used, any additional amount above the loan repayment amount will go to whomever you name as an additional beneficiary. If you pay off your SBA loan before the end of your life insurance term, you can usually cancel the policy to avoid continuing to pay the premiums,” says Fisher. As you’re weighing life insurance policies, verify with the insurer how much of the loan they’ll cover in the event of a claim. “The biggest thing a business owner should look out for are the rules regarding the collateral assignment. Most insurance companies will only cover 80 percent of the loan which won't be enough to satisfy the lender. So make sure when you apply you confirm with your life insurance agent that the life insurance company will cover the entire amount,” says Jeff Root, owner of Rootfin.com. If you’d like to purchase additional life insurance to take care of your family’s needs, you can purchase more life insurance with the single policy or a separate life insurance policy. Once you have the policy and are approved for the loan, the last thing to wrap up is the collateral agreement. “The most important part is getting a collateral assignment form signed off on by the lender, borrower and life insurance company. This makes so as you pay down the loan, the life insurance will only pay what’s left on the loan and pay the rest to your beneficiaries,” says Root. Key person insurance “Key person life insurance reimburses a business for lost income when the owner or key executive in the business passes away. The business purchases the policy on the life of the owner or key employee. This type of insurance is especially critical for businesses in which one or a few people are responsible for the business's income,” says Priyanka Prakash, Fundera business finance expert. This kind of insurance is important for people applying for an SBA loan. However, it’s also important to recognize that you may have other employees that play a key role in your business’s success that may be difficult to replace. “For example, the owner might have the bulk of the technical expertise or bring in the majority of sales leads. In this case, key person insurance helps to ensure the continued success of the business if that key person passes away. SBA lenders look for factors which will aid in the continuity of the business, so having this type of life insurance this can help an applicant qualify for an SBA loan,” adds Prakash. Depending on the purpose of the key person policy, the amount you purchase my vary. Are you trying to offset the costs of replacing this person? Are you trying to protect revenue and profits while replacing this person? Are you trying to keep your business’s cashflow stable while it recovers from the loss? Knowing your purpose will help you know which costs to consider and how much coverage to buy. In most cases, you’ll want to consider what the revenue and profit loss would look like without this person, the person’s salary and bonuses, and how expensive the hiring process would be. Key person life insurance is a wise investment if your business would struggle if a team member passed away. However, life insurance does not offer disability coverage. “While life insurance is the main focus of some brokers because of the commission, keep in mind that there is a four times greater chance between the ages of 50 and 60 for a person to become disabled long-term that to die. Therefore, disability coverage that is of the 'key man' type (pays a lump and/or termed payment to replace key talent and keep the business running until the owner or key person can return to productivity. These policies should be a matter of negotiation, rather than just caving to a demand or automatically offering; they obviously sweeten the deal for a previous owner providing owner financing and they reduce risk for other lenders,” says Dan Gallagher ScoreSense personal finance expert. What kind of life insurance to buy Life insurance falls into two main categories: term life insurance and permanent life insurance. Term life insurance only offers coverage during a specific period of time, usually between 10 and 30 years. Permanent life insurance has no expiration date as long as you make premium payments. Keep in mind that if you stop making premium payments, you’ll lose the coverage. Jacobitz Wealth Management Group financial adviser Robert Forrest offers some helpful tips on choosing between a term and permanent policy: “As a general principal, one could say that people need term life insurance for temporary situations and permanent life insurance for permanent situations. For example, things like debt or replacing income are temporary matters; once the debt is paid off you no longer need to insure it. Once you stop working, you no longer need to replace your income. But if you want to guarantee you leave a $1,000,000 legacy to kids or a charity? That’s a permanent life insurance situation.” While there will be some situational differences as you approach this decision from a business perspective, distinguishing temporary and permanent coverage needs will help ensure that you find the right policy fit. SBA loans SBA loans are temporary needs because once the loan is paid off, you no longer need life insurance as collateral. “Getting an SBA loan takes a bit of work. The process of obtaining a life insurance policy as collateral for the loan is one of the many hoops an entrepreneur will need to jump through in the process. For this reason, most people want the quickest, cheapest form of life insurance to satisfy their loan requirements. That option is almost always term life insurance,” says Alex Enabnit, TermLife2Go life insurance expert. Most life insurers offer term life insurance. Depending on your needs, you can find guaranteed policies or policies with accelerated underwriting. Guaranteed policies tend to be more expensive because they premiums are set. You may be able to qualify for lower premiums on a policy with underwriting if you’re in good health. Some term policies have decreasing coverage. This option can be tempting, especially since the coverage you need for your loan decreases as you pay it off. “I do not recommend any kind of decreasing term life insurance products because they tend to cost more,” says Fisher. Purchasing life insurance can be daunting. It’s easy to become overwhelmed by industry jargon. And, with the busy life of an entrepreneur it can be tough to make time during the day to meet with a life insurance agent. Some companies, like Bestow, make it easier by allowing you to purchase term life insurance online. This makes buying life insurance a simple process once you know what you need. Key person insurance When choosing between a term life insurance policy or a permanent one for key person insurance, it can vary based on company needs. Keep in mind that key people may decide to take a job elsewhere and will eventually retire. Term life insurance is also cheaper, so it can make sense to go that direction instead of another. If the key person is going to be with the company in the long-term, permanent life insurance may make sense. In some cases, these policies can be transferred from the business to the individual insured. Life insurance for entrepreneurs Keep in mind that life insurance for your business is there to protect your business. Life insurance for your family or beneficiaries is to protect your beneficiaries finances. These are two different purposes. Depending on how you’ve set-up your business, you may want policies to serve both purposes or just need a policy to protect your family. Working with a life insurance agent can help you understand your options and find the best fit for you. Choosing a trustworthy life insurance company will also ensure that your beneficiaries will be paid when they make a claim. Bonus: Expert tips on life insurance for entrepreneurs Finding the right fit Jason Fisher, BestLifeRates.org CEO and founder“Finally, whether you have only one policy that covers your business loan and has an overage for your beneficiaries, or you have two separate policies, really depends on the needs of your beneficiaries. If you were to pass away, would the amount be enough after the loan is paid off first? Remember, the loan becomes the first beneficiary and your loved ones become secondary.” Jason R. Hill, FSS Client Focused Advisors CEO and financial adviser and Life Insurance for SBA Loans founder“Once you determine the right carrier that fits you, the final step is to review your needs. If you do not currently have life insurance, this may be the perfect time to secure additional coverage for your family. You can buy one policy to fit your needs. It's is a myth that you need two policies. For example, if you were required to have $1,500,000 as the SBA life insurance requirement for 10 years. You instead can purchase $3,000,000 for 20 years to fit the needs of your family. If something were to happen to you, then the bank would get the balance of the loan and the primary beneficiary would receive the remainder. Additionally, you could consider all other term lengths, or lifetime coverage such as universal or whole life policy. Once the SBA loan is paid off then the policy is owned 100 percent by the owner and the collateral assignment is removed. One reason to keep it separated is on smaller policies if you want to go through the no-exam or accelerated process if you have a short closing window.” Protecting your business and your family Robert Forrest, Jacobitz Wealth Management Group financial adviser“When advising business owners on finances, we always recommend keeping them as separate as possible. Even if you’re a sole proprietor just getting started. It’s wise to keep business and family finances separate. That includes debts, cashflow, and insurance. Let your business income (and checking accounts) pay for your insurance for your business.” Brian Cairns, ProStrategix Consulting CEO“If you are not a sole-proprietorship, you probably don’t need to take out two policies. If you are a sole-proprietorship, you may want to consider two policies since your family’s assets are at risk if you default for any reason, including disability, death, etc.” Luis Avalos, Deductible Funding Solutions, Inc. COO“Setting aside a life policy for the SBA loan and purchase a separate policy to protect their family in the event of an unfortunate circumstance is a great option. Entrepreneurs should not only consider but always name the lender as primary beneficiary for the one term life policy associated with the SBA loan. Entrepreneurs should also be aware that SBA loans for business tied to an individual or individuals do require life insurance to protect the lender. Our lives can change from one day to another. Please keep your options open and protect your assets.” Forrest“If you’re starting a business with one or more partners, please, please, please be sure to set up a buy-sell agreement and fund it with life insurance. A buy-sell agreement is a legal contract that requires the other owner(s) to buy out the portion of an owner when they die or become permanently disabled. Otherwise, your ownership of the business goes to your spouse and the people who went into business with you, may not want to go into business with your spouse. The most cost-efficient way to fund a buy-sell agreement is with insurance.”