You might not have thought of taking the time to compare life insurance quotes.
However, purchasing and maintaining life insurance is a critical task when it comes to making sure your family’s finances are secure. Many people place heavy emphasis on securing their financial futures by investing their income in 401(k) plans, stocks, and other investments, yet they procrastinate when it comes to shopping for life insurance coverage.
One of the main reasons why people hesitate to shop for life insurance is because they simply see this coverage as an extra expense. Fortunately, with a little preparation and a solid understanding of your financial objectives, you can obtain life insurance coverage that protects your family at a price you can live with.
Deciding Which Type of Life Insurance to Buy
Before you compare life insurance quotes, it is important to review your financial objectives to make sure you are shopping for the right type of coverage for you and your family. If you purchase the wrong type of coverage, you might not be using your premium dollars effectively. Some things to consider include:
- The length of time you will need life insurance coverage. For some consumers, having financial protection during working years is the primary consideration. They may anticipate that they will no longer need life insurance coverage after they have retired, the mortgage has been paid off, and the children have left the house. If having coverage for a limited period of time is important, a term policy can provide the protection you need while minimizing premium costs. For others, the ability to leave an inheritance to children is the primary concern. For these consumers, a whole life policy that stays in force until age 120 might be a more appropriate choice.
- Whether you want to augment traditional investments with life insurance. Term coverage only provides a death benefit if you die during the policy term – in most cases, you will not have anything to show for your premium expenses if you outlive the policy. Conversely, many whole life policies allow you to divert part of your premiums to a cash value account that can earn interest each year. Along with traditional investments and savings, this can help you build a strong financial foundation for retirement.
- How much you are willing to pay for coverage. Because term life only provides a death benefit for a specified number of years, it is relatively inexpensive. On the other hand, because whole life stays in force until you die or turn 120, the premiums for the same amount of death benefit coverage are substantially more expensive.
Obtaining Multiple Life Insurance Quotes
Once you have determines which type of life insurance policy is right for you, it is important to obtain coverage quotes from multiple carriers. Because life insurance companies are permitted to determine their own rates in most states, you will likely find that different insurance carriers will charge different premium rates for the same amount of death benefit coverage. Simply choosing the first policy you find could mean paying more than necessary for life insurance.
Online quoting makes it easy for you to receive and compare multiple quotes at once. Instead of having to complete numerous rate quote requests, you can simply submit a single request. Within minutes, you can receive rates from several insurers. You can then compare prices to find the policy that best fits your needs and budget.
When comparing rates, it is important to consider the terms of each policy. Although each life insurance policy may offer the same coverages, there may be different provisions and exclusions that affect your beneficiary if you die, or that affect the funds in your cash value account:
- Check death benefit exclusions to understand circumstances under which the death benefit would not be paid. For example, some policies exclude coverage if you die while participating in a dangerous recreational activity, such as bungee jumping or skydiving. Knowing a policy’s exclusions can prevent surprises for your family after your death.
- If you are purchasing a whole life policy, review the loan provisions. One of the key benefits of whole life is the ability to take a loan against your cash value to pay for retirement costs, a large acquisition, or unexpected expenses. Many policies contain provisions, though, that restrict your ability to obtain a policy loan. For example, you may be prohibited from taking out a loan during the first 10 years the policy is in force.
- Review administrative, maintenance, and other fees when you compare life insurance quotes. In many cases, fees for whole life policies can be as high as 3 percent of your cash value balance per year. Over time, high maintenance and administrative fees can drastically erode your cash value savings.
