If you have family members depending on your income, a term life insurance policy can ensure they’re taken care of if you die. While it’s difficult to face that potential reality, it’s easy to get a term life insurance policy that provides peace of mind. In some cases, you may even be able to buy term life insurance online without a medical exam. We’ll cover everything you need to know to get the right policy for your needs.
What Is Term Life Insurance?
Term life insurance is a type of life insurance that provides a lump sum (“death benefit”) to a beneficiary if you die. Term life insurance typically covers you for up to 30 years. If you die while the policy is in force, your beneficiaries will receive a death benefit. However, if you die after the term has ended, there is no death benefit, in most cases. Some term policies are convertible–you can switch your term policy to a permanent policy without another health screening.
Term life insurance protects your family from having to replace your income or cover your debts if you’re no longer around. For example, you could choose a term that lasts until you’ve paid off your mortgage, your children are grown, and your spouse no longer depends on your income. Throughout the term, you’ll pay monthly premiums in exchange for coverage. The good news is, term life insurance is much more affordable than permanent life insurance, and it’s sufficient for most people.
How To Buy Term Life Insurance
Determine How Much Term Life Insurance You Need
Generally speaking, you should buy enough life insurance coverage to replace the income you earn for your family, including “hidden” sources of income like health insurance and 401(k) matching, plus a little extra to cover your final expenses. If that seems overwhelming to calculate, a general rule of thumb is to buy a policy worth 10 times your annual salary, plus an extra $100,000 to $150,000 per child to cover college expenses.
Once you determine how much coverage you need, you’ll want to compare quotes across a handful of reputable providers. Our research-based roundup of the best term life insurance companies is a great place to start. If you want to vet companies yourself, be sure to research the following:
- AM Best rating: Evaluates a company’s financial stability
- J.D. Power ranking: Rates companies based on a variety of consumer-focused criteria
- NAIC complaint index: Provides a complaint score based on how many complaints are expected for the company’s size
- Customer reviews on independent review sites: Gives you insight into customers’ first-hand experience
You’ll also select companies based on features that are important to you. For example, you may only want companies that offer the coverage amount you need without a medical exam. You may also evaluate companies based on their application process and the digital tools they provide.
You can often get a quote directly from the insurer’s website, but some companies may require a phone call. Another option is using an online brokerage or aggregator sites to collect quotes from multiple companies without needing to fill out multiple forms. You’ll typically need to provide the following information to get a quote:
- Personal data: What is your zip code or address, citizenship status, social security number, date-of-birth, gender, height, and weight?
- Financial data: What’s your outstanding mortgage balance, your income, and your assets. You may also be asked how many children you have, too.
- Lifestyle choices: Have you used marijuana, tobacco, or other nicotine products within a period, such as the past five years? You may also be asked whether you engage in risky activities such as skydiving or rock climbing.
- Policy choices: How much life insurance do you want and what term do you need?
- Health history: Have you had past surgeries and other previous health conditions?
- Family medical history: Does your family have a history of certain conditions such as cancer, diabetes, heart disease, and high blood pressure?
- Driving record: Have you had any DUIs or other driving violations?
- Credit score: Some companies may ask for your estimated credit score, and may even run a hard credit check.
- Occupation: You’ll likely pay more for life insurance if you work in a high-risk occupation.
- Current health: You may be asked to take a medical exam, or you may be asked health screening questions. For example, you might have to provide a list of your current medications.
Add Riders (Optional)
Some companies offer life insurance “riders,” which are additional features or benefits you can add to your policy. For example, you may need to purchase a rider to make your term life insurance policy eligible for renewal or conversion to a permanent policy. Many companies also offer accelerated death benefit riders, which allow you to access a portion of the death benefit while you’re still living in certain scenarios, such as terminal illness. A waiver of premium rider protects you if you become disabled and can’t pay for your policy. Decide which options are most important to you and determine whether your budget allows for the additional cost.
Fill Out an Application
Many life insurance companies let you complete an application online. One of the main differences between applications is whether you need a medical exam. Some insurers require it, but others offer no-medical-exam life insurance to applicants in excellent health.
Some no-exam life insurance policies are instead designed for applicants in poor health. These are often called final expense or burial insurance policies. While they can be easy to get, they're often very expensive, relative to the amount of coverage they provide.
If you get an exam, it typically includes a urine sample and blood test, and may include EKG, treadmill test, x-rays, and even a cognitive test. Some companies may offer to send someone to your home to perform the exam to make it more convenient for you.
Typically, your life insurance policy begins as soon as you’ve signed your policy documents and paid your first premium. Most companies will allow you to pay online via credit card, but some may require a check or bank transfer.
During your policy’s free-look period, you can cancel without penalty and receive a refund of your paid premiums. This gives you the opportunity to ensure you are happy with your life insurance provider and policy. Laws vary by state, but insurers are typically required to provide a free look period of 10 to 30 days. Some insurers may offer a 30-day free look period to policyholders no matter which state you’re in.
Do I Need Term Life Insurance?
If you have enough money to cover your final expenses and don’t have any dependents, you may not need term life insurance. However, if your family depends on your income to pay the bills, forgoing life insurance could leave your loved ones vulnerable to financial hardship if you die. And if you expect to have dependents in the future, getting life insurance when you're young can be a good idea. But in this case, it may make more sense to get a permanent life insurance policy, such as whole life insurance.
Term Life Insurance Cost
The cost of your policy will depend on the term and coverage amount you choose along with any riders you add. Insurance companies also use many individual factors to determine your life insurance rates, including your current health, age, gender, smoking status, lifestyle choices, and occupation. Below are average rates people in excellent health may pay for a 30-year term policy based on their age.
|$500,000 30-Year Term Policy|
|Age||Average Monthly Cost, Male||Average Monthly Cost, Female|
|$1 Million 30-Year Term Policy|
|Age||Average Monthly Cost, Male||Average Monthly Cost, Female|
Best Term Life Insurance Companies
|Insurance Companies||Terms Available|
|Protective||10, 15, 20, 25 and 30 years|
|Banner||10, 15, 20, 25, 30, 35, 40 years|
|Haven Life||10, 15, 20, 25, or 30 years|
|Mutual of Omaha||10, 15, 20, or 30 years|
|MassMutual||10 to 30 years|
|Guardian||10, 15, 20, or 30 years|
|USAA||10 to 30 years|
|State Farm||10, 20, or 30 years|
|New York Life||10 to 20 years|
|Northwestern Mutual||10, 15, 20 years|
What Is the Difference Between Term and Whole Life Insurance?
Term life insurance is temporary, while whole life insurance is designed to provide a guaranteed death benefit no matter when you pass away. Whole life insurance also has a cash value component you can borrow against. For these reasons, whole life insurance is significantly more expensive than term life insurance.
Is Term Life Insurance Worth It?
If you think your family’s financial well-being is worth protecting, then term life insurance is worth the cost. The best term life insurance companies offer affordable premiums, especially to younger policyholders. That said, if you don’t have any dependents and can afford your final expenses, you probably don’t need life insurance.
How Much Term Life Insurance Do I Need?
You should buy enough term life insurance to cover the income you expect to earn for your family over the course of your life. Don’t forget to account for employer benefits and other hidden sources of income as well. For a quick and easy estimate, multiply your salary by 10 and add enough to pay for your children’s college education.