Life Insurance: Policies, Types and Quotes

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Are you looking for the right life insurance policy for you and your family but unsure where to start? Read our life insurance guide to learn more. We break down the types of coverage available, the costs and the best companies in the business.

Why you can trust NerdWallet: Our writers and editors follow strict editorial guidelines to ensure the content on our site is accurate and fair so you can make financial decisions with confidence and choose the products that work best for you. Here is a list of our partners, and here’s how we make money.

What is life insurance?

A life insurance policy is a contract between you and an insurance company. In exchange for regular payments, called insurance premiums, the insurer pays out money after you die. This money goes to the people you choose as life insurance beneficiaries — usually children, a spouse or other family members.

A life insurance policy can be an important safety net if anyone depends on you financially. Beneficiaries can use the money for any purpose, such as repaying debts or replacing your income.

Top reasons to get life insurance

Generally speaking, the main purpose of life insurance is to replace your income. However, there are other motivations to buy coverage. Here are five top reasons people get life insurance policies, according to a NerdWallet study:

Types of life insurance policies

The two main types of life insurance are term and permanent. Term life policies cover you for only a set period of time, such as 10 or 20 years, while permanent life insurance can last your entire life.

Types of term life insurance policies

Types of permanent life insurance policies

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What is the best life insurance policy for me?

To help you decide which type of life insurance policy is best for you, ask yourself these three questions:

  1. How much can I afford to spend every month? It’s important to find a policy that fits within your budget. If you miss payments, the insurer may cancel your policy, leaving your beneficiaries without a payout. Term life is typically cheaper than permanent life insurance, so if your budget is tight, a term life policy may be a good fit.

  2. How long do I want the policy to last? If you need a policy to cover only a set period of time, consider term life. However, if you need a policy that’s likely to last your entire life, explore permanent coverage like whole life.

  3. What financial obligation is the death benefit covering? If you’re getting life insurance to cover burial expenses, you’ll likely need a small whole life policy because it typically offers lifelong coverage. But if you want a policy to replace your income during your working years, a 20-year or 30-year term life policy may be a better fit.

How much life insurance do I need?

To figure out how much life insurance you need, think about your financial obligations now and in the future. Then, aim to take out a policy to match them. Use our coverage calculator to estimate your coverage amount.

Although you may have some coverage through your job, it’s generally a good idea to have your own life insurance policy as well. Group life insurance policies through work aren't typically enough to meet your family’s financial needs and can end if you leave the job.

How much does a life insurance policy cost?

Life insurance is cheaper than you might think. The average life insurance rate for a 40-year-old in excellent health can be as little as $26 a month for a 20-year term life policy with $500,000 in coverage, according to Quotacy, a life insurance brokerage.

Rates can vary among insurers — sometimes significantly — so it’s a good idea to compare life insurance quotes from several companies before you buy.

Life insurance quotes

A life insurance quote is an estimate; it gives you an idea of how much you’ll pay for the coverage. Quotes are typically based on a few details like the type of policy you’re shopping for, the amount of coverage you need and personal factors like your age and smoking habits.

When you apply for a policy, the insurer typically collects more detailed information about your health and lifestyle to calculate your final rate, which may differ slightly from the quote.

Term life insurance quotes

Quotes for term life insurance are often lower than those of permanent policies because term life lasts for only a set period of time, like 10 or 20 years. Plus, term life doesn’t build cash value like most permanent policies do. In general, you can get a term life quote online by entering a few details like the term length and coverage amount you want as well as your age, gender and location.  

Whole life insurance quotes

Whole life is a type of permanent coverage. This means it typically lasts your entire life and has the potential to build cash value. It’s more complex than term life, so getting quick online quotes is less common. You may need to speak with an agent or submit your contact details to get a quote.

Compare life insurance quotes

It’s a good idea to compare quotes from multiple insurers before buying a policy. But when you do, make sure you compare the same features from each company. For example, select the same types of policies with the same coverage amounts or term lengths, and give the same personal details for each quote. This will help you get a more accurate comparison.

Aside from price, financial strength and complaint data are important factors to consider when comparing life insurance policies.

  • Financial strength ratings are issued by agencies like AM Best. They typically indicate an insurer’s ability to pay out a future claim. NerdWallet typically recommends considering insurers with ratings of A- or higher.

  • Complaint ratios from the National Association of Insurance Commissioners can give you a better picture of a company’s customer experience. Our life insurance ratings methodology favors companies that have fewer complaints to state regulators.

Average cost of a term life insurance policy

Here are average annual life insurance rates for a $500,000, 20-year term life insurance policy for the healthiest applicants.

Age

Average annual rate for men

Average annual rate for women

30

$224

$189

40

$335

$283

50

$829

$645

60

$2,361

$1,666

70

$9,297

$8,204

Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of January 23, 2023.

Average cost of a whole life insurance policy

Here are average annual life insurance rates for a $500,000 whole life insurance policy for the healthiest applicants.

Age

Average annual rate for men

Average annual rate for women

30

$4,652

$4,015

40

$7,028

$5,937

50

$11,163

$9,443

60

$19,150

$15,943

70

$30,462

$27,398

Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of January 23, 2023.

How are life insurance premiums calculated?

Life insurance premiums are typically based on your life expectancy, which equates to how likely it is the insurer will have to pay out a claim. The higher the chance of paying a claim, the higher the premiums.

To estimate your life expectancy, each life insurance company weighs factors like your health, family health history, lifestyle and driving record.

Did you know...

Two of the main factors that affect your life insurance premium are your age and health. So, the younger and healthier you are when you apply for coverage, the better your life insurance rate is likely to be.

You can still get life insurance if you have a medical condition, but insurers vary in how they view pre-existing conditions, and prices for the same condition may vary between insurers. Some policies, such as simplified issue and guaranteed issue life insurance, don’t require a medical exam. These types of policies are typically called no medical exam life insurance. However, because the insurer can't estimate your life expectancy as accurately with limited information about you, the rates for these types of policies can be higher.

🤓Nerdy Tip

If you’re healthy, saying yes to a medical exam gives the insurer a more complete picture of your health and could lower your rate.

Best life insurance companies

Learn more about some of the top insurers by reading our life insurance reviews. NerdWallet ratings are determined by our editorial team and take into account consumer experience, financial strength and customer complaint data.

5.0

NerdWallet rating 

Term, whole, universal and variable universal.

5.0

NerdWallet rating 

Term.

5.0

NerdWallet rating 

Term, whole and universal.

5.0

NerdWallet rating 

Term, whole, universal and variable universal.

5.0

NerdWallet rating 

Term, whole, universal and variable universal.

5.0

NerdWallet rating 

Term, whole, universal, variable universal and indexed universal.

5.0

NerdWallet rating 

Term, whole and universal.

5.0

NerdWallet rating 

Term, whole and universal.

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Frequently asked questions

In general, you need life insurance if anyone depends on you financially. For example, if you’re the breadwinner, a parent, a homeowner or someone with co-signed debt, you may need coverage.

The amount of life insurance you need is based on your current and future financial needs. When calculating your coverage amount, consider your current and future financial obligations, such as income, debts and daily expenses.

The average life insurance rate is $26 a month, according to Quotacy. This rate is based on a $500,000, 20-year term life policy for a healthy 40-year-old. The average monthly life insurance rate for a $500,000 whole life policy is $547.

Term and permanent life insurance are the two main types of coverage. Term life is temporary and lasts only a set period of time. Permanent life insurance policies typically last your entire life and include an investment component. Whole life and universal life are types of permanent coverage.

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