Finding The Best Term Life Insurance For You

When looking for a good term life insurance policy, there are several factors to consider. These include the financial strength of the insurance company, customer satisfaction scores, and the specific terms and riders offered by the policy. It is also important to evaluate your personal situation and consider the coverage amount and duration that best suit your needs. Comparing quotes from multiple insurers is essential to finding the most cost-effective option. Additionally, bundling life insurance with other policies, such as home or auto insurance, can result in discounts. When choosing a term life insurance company, it is crucial to weigh these factors to ensure you find the best fit for your circumstances.

Calculate how much coverage you need

When calculating how much term life insurance coverage you need, it's important to consider your financial goals and needs. Here are some factors to take into account:

Financial obligations and long-term goals

Calculate your financial obligations, such as mortgage payments, college fees, and burial costs. Consider your future expenses and financial goals, such as saving for your children's education or retirement. You can use a life insurance calculator to estimate these costs by inputting your annual income, the number of years your dependents will need financial support, your debts, future college costs, and burial expenses.

Income replacement

If you want your life insurance to replace your income for your loved ones, you can multiply your annual income by the number of years until your retirement. This will provide your beneficiaries with a death benefit equal to the total amount of money you would have contributed.

Debts and final expenses

Calculate your debts, including credit card debt, student loans, and any other financial obligations that your loved ones might struggle with if you pass away. Also, consider the cost of final expenses, such as funeral and burial costs, which can be covered by your life insurance policy.

Number of dependents and their needs

Consider the number of people who depend on you financially, such as your spouse, children, or other family members. Think about their needs, including daily living expenses, education costs, and any other financial obligations they may have.

Existing assets and coverage

Subtract your existing assets, such as savings, investments, and any current life insurance policies, from your total financial obligations. This will give you a more accurate idea of the coverage gap that needs to be filled by life insurance.

Type of life insurance

Decide on the type of life insurance you need, such as term life insurance or permanent life insurance. Term life insurance covers you for a specific period, while permanent life insurance lasts your entire life and often includes an investment component.

While there are online calculators and rules of thumb to estimate your coverage needs, consulting a financial professional or insurance agent is advisable. They can help you assess your unique situation and determine the appropriate level and type of coverage.

Consider additional riders

Riders are optional provisions in a life insurance contract that can provide added benefits or flexibility. They are like add-ons to your policy that enhance your coverage. Riders can be a great way to customize your term life insurance policy to fit your unique needs and circumstances.

• Accelerated Death Benefit Rider: This rider allows you to access a portion or all of the policy's death benefit while you are still alive if you are diagnosed with a terminal illness. It provides financial support to help pay for medical care and treatments. This rider is often included in the policy premium at no additional cost, but there may be a fee for accessing the benefit.
• Accidental Death Rider: This rider increases the payout to your beneficiaries if your death is due to a covered accident. It provides an additional benefit on top of the standard death benefit. However, the death must occur within a specified period after the accident for the rider to take effect.
• Child Term Rider: This rider provides coverage for your children under your policy. It pays a small death benefit, typically ranging from $5,000 to $25,000, if a child passes away before reaching a certain age, usually around 25. It offers peace of mind for parents and covers biological, step, and legally adopted children.
• Guaranteed Insurability Rider: This rider allows you to increase your life insurance coverage in the future without undergoing a medical exam or health questionnaire. You can typically increase your coverage during "option periods" every few years or after major life events, such as marriage or having a child.
• Long-Term Care Rider: This rider allows you to access your life insurance death benefit early if you have a chronic illness and require assistance with daily living tasks. There are two types: reimbursement riders that cover your long-term care expenses, and indemnity riders that provide a predetermined monthly benefit.
• Return-of-Premium Rider: This rider refunds some or all of your premium payments if you outlive your term life insurance policy. However, it comes at a high cost and may significantly increase your premium.
• Waiver of Premium Rider: If you become totally disabled and unable to work, this rider will cover your life insurance premiums. It provides financial relief during a difficult time by ensuring your policy remains in force.

These are just a few examples of the many riders available. When considering additional riders, it is important to evaluate your specific needs and circumstances. Riders can provide valuable protection and benefits, but they may also increase the cost of your policy. Be sure to carefully review the terms and conditions of each rider to understand what is included and any associated fees.

Get prices from a handful of companies

The cost of coverage varies among companies, so it's a good idea to compare life insurance quotes from multiple insurers. You want to choose a company with a strong financial strength rating, which indicates its ability to pay claims far into the future. You can check the financial strength rating of each term life insurance company you're considering through a rating firm such as AM Best.

NerdWallet typically recommends considering insurers with ratings of A- or higher. All of the largest life insurance companies have solid financial strength ratings.

You can also use a quote tool online to get an idea of how much term life insurance might cost. For example, Mutual of Omaha offers a term life insurance quote tool online. Enter your gender, date of birth, tobacco usage and coverage amount to get a rate.

Compare multiple quotes

Comparing multiple quotes is an essential step in finding good term life insurance. Here are some tips to help you through the process:

Understand the Factors Affecting Your Rates

Before comparing quotes, it's helpful to understand the factors that influence your life insurance rates. Your rates will be determined by the information you provide, such as your age, health, the requested death benefit amount, the term length, and the insurer underwriting the policy. Generally, younger and healthier individuals tend to receive better rates.

Gather Quotes from Multiple Insurers

Obtain quotes from multiple insurance companies. You can do this by visiting their websites, contacting their agents, or using online comparison tools. Provide basic personal information, such as your name, age, gender, health status, and location, to receive a rate. This process can often be done quickly, sometimes in as little as 60 seconds.

Compare Coverage Levels and Policies

When reviewing the quotes, pay attention to the coverage levels and policies offered by different insurers. Consider the term length, death benefit, and any additional benefits or restrictions included in the policy. Compare how these aspects meet your specific needs and budget.

Play with Different Options

Experiment with different coverage amounts and insurers to find a policy that suits your requirements. You may find that adjusting the coverage amount or choosing a different insurer can significantly impact the rate. This step ensures that you find a policy that aligns with your financial goals and circumstances.

Consider Using a Broker

Working with a broker can simplify the process of comparing quotes. Brokers can shop around on your behalf and provide expert guidance tailored to your specific needs. They have access to multiple insurers and can help you navigate the complex world of life insurance.

Understand the Quote and Rate Differences

Remember that a quote is an estimate of what you'll pay, while the rate is the actual amount you'll be charged for the coverage. Insurers may request additional information during the application process to calculate your final rate, which may differ from the initial quote.

By following these steps, you can effectively compare multiple quotes for term life insurance, ensuring that you find a policy that offers the coverage you need at a price you can afford.

Consider customer satisfaction scores and financial strength ratings

When looking for a good term life insurance company, it's important to consider customer satisfaction scores and financial strength ratings. These factors can give you an idea of how well a company treats its customers and how financially stable it is.

Customer satisfaction scores reflect how satisfied existing customers are with the company's customer service and claims process. You can use these scores to get a sense of how your experience as a customer might be and to set your expectations. You can find customer satisfaction scores on sites like J.D. Power, TrustPilot, the Better Business Bureau, and third-party platforms.

Financial strength ratings, on the other hand, indicate a company's ability to pay future claims and honour its financial obligations. These ratings are assigned by independent credit rating agencies, such as AM Best, Fitch, Moody's, and S&P. The ratings are usually in the form of letter grades, with "AAA" or "A++" being the highest. Financial strength ratings are a good indicator of a company's stability and reliability, giving you peace of mind that the company will be able to pay out claims in the future.

When evaluating a company's financial strength, it's also worth considering factors such as the company's years in business, investment portfolio, ownership structure, and market position. Additionally, you can look at their rating history to see if there have been any significant changes over time.

It's important to note that financial strength ratings should not be the sole factor in your decision. Other factors, such as premium costs, policy type, term length, and customer service, should also be considered when choosing a term life insurance company.

Frequently asked questions