Choosing The Right Life Insurance: America's Best Policies

Life insurance is a type of insurance that provides money to your chosen beneficiary when you die. It is a good idea to have life insurance if you have loved ones who depend on your income, if you have outstanding debts, or if you want to cover end-of-life expenses.

When choosing a life insurance company, there are several things to consider, including what policies are available, the company's financial strength, and customer reviews. It is also important to compare prices between different insurers.

Some of the best life insurance companies in America include MassMutual, Guardian, Northwestern Mutual, New York Life, Pacific Life, State Farm, and AARP. These companies offer a range of term and permanent life insurance policies, have strong financial strength ratings, and have received positive customer reviews.

What are the different types of life insurance?

There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance is temporary and designed to cover you for a set number of years, such as 10, 20 or 30 years. It is generally the cheapest type of life insurance and is sufficient for most people. Permanent life insurance, on the other hand, is designed to last your entire life and includes a cash value component that grows over time. There are several types of permanent life insurance policies, including:

• Whole life insurance: This is the most straightforward type of permanent life insurance. It usually lasts your entire life as long as you keep up with premiums, and it often includes a guaranteed rate of return on the policy's cash value. Whole life insurance is typically more expensive than term life insurance.
• Universal life insurance: This type of permanent life insurance is more flexible than whole life insurance, as it allows you to adjust your premiums and death benefit within certain limits. The cash value of a universal life policy grows based on market interest rates and can eventually result in a zero-cost policy.
• Variable life insurance: This is a riskier type of permanent life insurance as it is tied to investment accounts such as bonds and mutual funds. The cash value of a variable life policy can change daily based on the market, so it requires more hands-on management. However, it offers the potential for considerable gains if your investments perform well.
• Final expense or burial insurance: This type of whole life insurance is designed to cover end-of-life expenses such as funeral costs, medical bills, and outstanding debt. It offers a smaller and more affordable death benefit, typically ranging from $5,000 to $25,000. Final expense insurance does not usually require a medical exam, making it more accessible to older individuals with pre-existing health conditions.

In addition to these main types of life insurance, there are also alternative types of life insurance that don't require a medical exam, such as simplified issue life insurance and guaranteed issue life insurance. These policies can be beneficial for healthy individuals who need coverage quickly, as the approval process is much faster. However, they generally cost more and may have lower coverage amounts due to the increased risk taken on by the insurer.

How much does life insurance cost?

The cost of life insurance varies depending on the type of policy, the insurance company, and the age, health, gender, and coverage amount of the insured, among other factors.

Term life insurance is the least expensive type of life insurance as it offers coverage for a set number of years without building cash value. The average cost of a 20-year, $250,000 term life insurance policy for a healthy 30-year-old buyer is $14 a month ($162 a year) for males and $12 a month ($144 a year) for females, according to Forbes Advisor. The same policy costs $19 a month ($227 a year) for a 40-year-old male and $16 a month ($197 a year) for a 40-year-old female. For a 50-year-old male, the average cost is $40 a month ($485 a year), while for a 50-year-old female, it is $32 a month ($386 a year).

Permanent life insurance, on the other hand, typically lasts a lifetime and includes a cash value component, making it more expensive than term life insurance. Whole life insurance, a type of permanent life insurance, has an average annual cost of $3,945 for a 30-year-old woman with $500,000 coverage and $4,375 for a 30-year-old man with the same coverage. Universal life insurance, another type of permanent life insurance, offers flexible premium payments and death benefits but is generally less expensive than whole life insurance.

No-exam life insurance, which does not require a medical exam, is also available, but the application process is streamlined, and options may be more limited. The cost of no-exam life insurance depends on the insurer and the applicant's age, gender, and health status.

What factors affect the cost of life insurance?

The cost of life insurance is determined by a combination of factors, including personal characteristics, lifestyle choices, and the type of policy selected. Here are the key factors that influence the cost of life insurance:

• Age: Age is the most crucial factor in determining the premium cost. Younger individuals tend to pay lower premiums since they have longer life expectancies and are less likely to develop health issues. The cost of life insurance premiums typically increases by 8% to 10% for every year of age.
• Gender: Women generally pay lower premiums than men because they have a longer life expectancy. However, gender is not the sole factor, as lifestyle choices and age can also impact the premium.
• Health: Insurance companies consider an individual's health status, including pre-existing conditions. Applicants with serious health conditions may be denied coverage or charged higher premiums.
• Smoking: Tobacco use significantly increases life insurance costs due to the associated health risks. Smokers may pay more than double the premium of non-smokers.
• Family Medical History: A family history of hereditary diseases or premature death can affect your premium. Life insurance companies assess the medical history of your parents and siblings to evaluate the risk of you developing similar health issues.
• Lifestyle and Occupation: High-risk jobs or dangerous hobbies can result in higher insurance costs. Life insurance companies may inquire about your job, hobbies, driving record, and criminal history during the application process, and these factors can influence the premium.
• Type of Policy: The type of life insurance policy chosen, such as term life insurance or whole life insurance, also impacts the cost. Term life insurance, which provides temporary coverage for a set period, is usually more affordable. In contrast, whole life insurance, which offers lifelong coverage and a savings component, tends to have higher premiums.
• Death Benefit Amount: The higher the death benefit amount, or the sum paid to the beneficiary upon the insured's death, the higher the premium will be.
• Riders: Riders are additional benefits that can be added to a life insurance policy, such as critical illness coverage or accidental death benefit. While riders enhance the policy's protection, they also increase the premium.

What is the application process like?

The life insurance application process can be lengthy and detailed, but it is important to be as accurate as possible to ensure you get the right coverage for your needs. Here is a step-by-step guide to the application process:

Determine the amount of coverage you need

First, you need to decide how much coverage you require. You can use an online life insurance needs calculator to get a free estimate, or you can do it yourself by considering your financial situation and future needs. Think about funeral expenses, debts, monthly living costs, medical bills, and education expenses. You should also factor in the annual income your beneficiaries might need.

Choose a policy type

There are two main types of life insurance: term life insurance, which provides coverage for a set period, and permanent life insurance, which offers lifelong coverage. Term insurance is a good option if you're seeking budget-friendly coverage for a temporary need, such as protecting your mortgage until your children are financially independent. Permanent insurance is more expensive but provides lifelong coverage and can include flexible premiums and a guaranteed interest rate.

Get a quote

You can save time by using a digital quote system, which will consider factors like your age, gender, health, location, and desired coverage amount and length.

Apply online or prepare for an interview

After getting your quote, you may be able to apply online, or you can set up an interview with a licensed agent. This step usually takes 15 minutes to an hour. Be prepared with the following documents:

• Social Security number
• Contact details for doctors, hospitals, or clinics visited in the past decade
• Details of any prescription medications
• Basic financial information
• Disclosure of other life insurance policies
• Beneficiary information

The medical exam and underwriting phase

Depending on your health assessment, you may need to undergo a medical exam, which is paid for by the insurance company. This typically involves collecting blood and urine samples, measuring vital signs, and, in some cases, an electrocardiogram (EKG). Be honest about your health status, as any hidden details could lead to higher premiums or even the cancellation of your policy.

After the application and medical exam, a life insurance professional will review your application to determine your final health class and premium. This underwriting phase can happen immediately or take a couple of months, depending on the availability of exams and medical records.

Finalize your policy

Your life insurance coverage is not active until you've accepted and signed your policy electronically and made the first premium payment. Be sure to share the news with your beneficiaries and store your policy in a safe place accessible to them.

Tips for a Smooth Application Process

• Start the application process early: It's beneficial to get life insurance while you're young and healthy to lock in a lower rate.
• Be honest: A life insurance application is a legal document, and lying can lead to a denial of your application or benefits.
• Consult a professional: Reach out to a reputable insurance professional to help you make informed coverage decisions based on your needs.
• Gather information in advance: Collect personal identification, proof of address, financial information, medical records, and beneficiary information beforehand to streamline the application process.
• Prepare for the medical exam: Follow any instructions provided by the insurance company, such as fasting or avoiding certain substances before the exam.

How do I choose the right life insurance company?

When choosing a life insurance company, there are several factors to consider. Here are some tips to help you select the right one for your needs:

• Identify your financial goals: Understand your financial goals and find a policy that aligns with them. An experienced insurance agent can help you navigate the different options and find the best fit.
• Compare prices: Shop around and compare prices between different insurers. You may find similar policies offered at different price points.
• Consider available policies: Not all companies offer the same types of insurance. Identify what you need, whether it's term life insurance, whole life insurance, or universal life insurance, and choose a company that provides it.
• Evaluate customer satisfaction: Look at customer reviews and ratings to gauge how satisfied customers are with the insurer. You can check the National Association of Insurance Commissioners (NAIC) website for complaints filed within a state.
• Assess financial strength: Choose a financially stable company that will be able to pay out claims in the future. Check financial strength ratings from independent agencies like AM Best.
• Consider riders: Riders are add-ons that customise your policy. Consider which ones are important to you and compare their costs across different companies.
• Application process: Depending on your situation, you may want to opt for a company that offers same-day issue policies without a medical exam. However, keep in mind that getting an exam if you're in good health could result in lower premiums.
• Free-look period: Life insurance companies are required to offer a free-look period, typically around 10 days, during which you can cancel the policy for a full refund.
• Get quotes: Collect quotes from multiple companies to compare prices and find the best deal.

Frequently asked questions