How to Shop for Term Life Insurance

If you want to buy life insurance, it's important to understand the basics first. Here's what you need to know.
Feb 25, 2015

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If you want life insurance to provide for your loved ones if you die unexpectedly, it's important to know how to buy life insurance.

For most people, the affordable option is term life insurance, which pays out a death benefit to your designated beneficiaries if you die within the term of your policy agreement. Term life insurance policies are generally cheaper and easier to get approved for than whole life or universal life insurance policies, which build up cash value.

Term life insurance policies have no cash value but offer a fixed death benefit and often fixed premiums for the length of the term. Term life is sold in increments — usually 10, 20 or 30 years. You can purchase term life insurance in a variety of ways: directly from an insurance company, through an agent or online.

Using an agent

Some agents only sell policies from certain companies, so if you limit your selection to their recommendations, you may end up missing out on a better option. You should review several quotes from different insurers to make sure you’re getting the best deal. Don’t ever stick with an agent who pressures you to buy a particular product if you don’t think it’ll work for you.

If you have an independent agent, make sure they give you quotes from multiple companies. You’ll want to find an agent who’ll take the time to help you understand what kind of policy you’re buying and answer any questions you have.

Insurance agents must be licensed by the state they do business in, so check your state’s department of insurance website to make sure your agent is legitimate.

Shopping online

You can easily compare term life insurance quotes by shopping online. Gather quotes from several top life insurance companies, but don’t give out sensitive information, such as your Social Security number. Reputable companies need only anonymous information to provide you with a quote.

Buying directly from a company

While some carriers offer only life insurance policies, bigger insurers provide multiple types of insurance. Many companies offer multi-policy discounts if you combine life insurance with your auto or home insurance.

Before you decide which company you’d like to go with, make sure they demonstrate financial strength. To research insurers, use resources such as the A.M. Best’s Consumer Insurance Center, or similar tools from Moody’s or Standard & Poor’s.

Applying and purchasing

When comparing insurers, provide thorough, updated information — particularly about your health — to get the most accurate quotes. The rule of thumb for life insurance is: The younger and healthier you are, the lower your premium. When you apply for a life insurance policy, you’ll have to include detailed personal information and may have to get a medical exam before getting a final price.

Once you get a quote, make sure the term life insurance policy will fit your needs, and determine if you can afford the premiums. NerdWallet's life insurance comparison tool will help you find rates. Remember to review your life insurance policy every few years in case your needs change.

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