Life Insurance: What It Is, How
It Works, And How To Find The Best Policy
Jonathan Cuevas
Last updated on June 27, 2023
There are different types of policies, dozens of companies to choose from, and many ways to purchase a life insurance policy.
Life insurance can be a confusing topic. myfinancialservicesca.com makes it easy for you. We know life insurance isn’t the most exciting topic, but we also know it’s important!
Below, we’ll help you better understand life insurance, how to shop for it, and guide you through finding the best policy for your situation as quickly as possible.
What is life insurance and how does it work?
Life insurance is a contract between a person (the policyholder) and an insurance company (the insurer).
The insurance company provides a payment, called a death benefit, to a person (or persons), called beneficiaries, designated by the policyholder, when the policyholder dies. In exchange for this, the policyholder makes payments called premiums to the insurer, usually monthly, for as long as they are alive.
It sounds simple enough, but there are many different types of life insurance policies available. Making sure you understand them is critical to finding the best life insurance for your needs.
What are the different types of life insurance policies?
Below are the 3 main types of life insurance.
- Term Life Insurance – This is the most popular. It lasts for a fixed period of time, called a term. This term is usually from 10 to 40 years.
- Whole Life Insurance – This type of life insurance lasts for your entire “life,” but is more expensive than term. It also comes with a cash value component that grows over time that you can borrow from while you’re alive.
- Universal Life Insurance – This type of policy also lasts for a lifetime, but it is more complex than whole life insurance. You have more options, like flexible premiums and death benefits. The cash value of universal life insurance can also be linked to investments in the market.
Other common types of life insurance include high-risk life , no-exam life , and final expense insurance . Read more about the different types of life insurance available here.
Common Questions People Ask About Life Insurance
Here are several frequently asked questions about life insurance.
How do I know if I need life insurance?
If you have family or other loved ones who depend on your income and would not be able to pay necessary expenses if you were to die, you may need life insurance.
- whole life insurance
- universal life insurance
- Variable life insurance
- Indexed Universal Life Insurance
Can I qualify for life insurance?
Almost anyone can qualify for some type of life insurance. Even people who have serious medical complications can purchase a guaranteed acceptance policy.
How much does life insurance cost?
The cost of your life insurance policy depends on:
+ The type of policy you get.
+ How much coverage you need.
+ Your age.
+ Your health.
+ The company you choose.
+ And many other factors.
A healthy 40-year-old man can get a 20-year term policy for $500,000 in coverage for about $36 per month. For the same policy, a healthy 40-year-old woman would pay about $30 per month.
How much life insurance coverage do I need?
Consider who you are buying life insurance for. At what point will they be financially well, if you passed away? It’s usually best to be covered until then.
For example, if you have a 3-year-old child, you can buy a 20-year term policy so that your child is covered until they finish college and can work.
Should I buy permanent or term life insurance?
Depends.
Term life insurance is good for families who would be financially disadvantaged if the breadwinner of the family died. Most people buy term life insurance until their children are of earning age or until they reach retirement age.
Permanent life insurance, including whole and universal, is generally for people who want to help their heirs pay estate taxes when they die. Many people use a permanent policy to leave an inheritance to loved ones, sometimes simply to cover burial costs. It is also common for parents with children with special needs to purchase a whole life policy.
How can I find a cheap life insurance policy?
To make sure you get the lowest rates, you must first choose the right type of policy and the right amount of coverage. Next, you should compare the rates of the best companies that specialize in the type of life insurance you are looking for. Comparing multiple companies can save you thousands of dollars over the life of the policy.
Choosing the best life insurance company
When deciding which life insurance company to choose, you must first consider the type of policy you need.
There is no “best company” for everyone.
One company may offer you lower rates for term life insurance, but an entirely different company might be better if you need a permanent policy. Some companies specialize in certain medical conditions, like life insurance for smokers or diabetics, and others have great policies for people 70 and older.
Read reviews of over 50 life insurance companies here.
Here are Insurance top 10 life insurance companies. Click to see a review of each company.
- Protective Life
- National Life Group
- Banner Life
- Prudential
- Foresters Finance
- American National
- Mutual of Omaha
- North American
- lincoln financial
- AIG (American General)
Read our reviews of the 10 best life insurance companies here.
There are dozens of other great providers, too, so be sure to compare more than just our top 10, especially if you have a unique health situation.
What is the best age to get life insurance?
One of the biggest factors in the price you pay for life insurance is your age. Older people will pay more, simply because they are at higher risk of dying.
At Insurance, we have written articles on almost every age at which a person might buy life insurance.
- life insurance at 20
- Life insurance at 30
- life insurance at 40
- life insurance at 50
- life insurance at 60
- Life insurance for people over 70
Read more about life insurance quotes by age here.
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About jonathan cuevas
Jonathan is the owner of yourinsurancesolutions.org. He is an independent life insurance agent specializing in helping the community with life insurance and has helped thousands of purchase life insurance online and over the phone.
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