With nearly a thousand life insurance carriers competing for your business, choosing the best one can be overwhelming. Couple that with the confusing life insurance terminology it can make many shoppers just want to throw up their hands and not want to buy a policy at all. This post will break everything down for you, from the difference between term vs. whole life, how much coverage you should have, and how to find the lowest rates-all very quickly. Let’s get started.
Term vs. Whole life insurance
Deciding on which type of policy you need is very important. Far too often buyers are persuaded into buying a whole life policy by an overzealous agent looking to score a large commission, when in fact a term life policy would have been a much better option.
Term life insurance lasts for a designated period of time. The term period for most companies range from 10, 15, 20, and 30 years and the rates do not change during this time. Also, there is no penalty for cancelling the policy early.
Whole life insurance is a policy that remains in effect for the policy holder’s entire life. Generally speaking, the policy will remain active as long as the owner continues to pay the policy premiums.
Since term life insurance offers the greatest amount of coverage at the lowest price, (about half the price of whole life insurance) term insurance is usually the best choice for most families.
How much coverage do you need?
As a general rule of thumb many financial advisors recommend 7 to 10 times your annual income in life insurance coverage. This is just a general rule as everyone’s situation is different. To be even more precise, it is advisable that you or your agent conduct needs analysis.
How do you find the lowest rate?
With so many companies it can be very time consuming shopping around and getting quotes from each carrier. Fortunately, with the advent of the internet the process has become much easier. I recommend using a quote engine that does this work for you by comparing the rates from the top companies from the lowest to highest prices. Let’s look at the rates for a $600,000 term life policy on a 10-year term for a 40-year old male, non-smoker in excellent health using this quote engine. As you can see the rates can vary significantly for the same policy.
SBLI = $22 month North American= $26 month
Protective = $23 month Genworth= $28 month
Banner= $24 month ING= $28 month
MetLife= $25 month American General= $29 month
Transamerica=$26 month Lincoln Benefit= $35 month
What happens after you choose a policy?
After you choose a policy the next step will be speaking an agent. They will go over the application and schedule a paramed exam. After the underwriting is complete, which typically takes between 2 to 6 weeks, you will receive the final offer from the insurance company. If you accept the offer, you then pay the first premium payment and your policy is now “inforce” and you are all set.
It is important that you work with an experienced agent to make sure these steps are followed correctly.
Please feel free to use the quoting engine to shop for the best rates or call me if you have any questions (888) 788-1052.
*Rates as of 3/09/2013. The information in this post is for informational purposes only and is not a guarantee of rates and insurability. Rates and eligibly are subject to the underwriting guidelines of the insurance companies and state in which you live.