5 things to watch out for when shopping for life insurance

Find out what you need to know before making this important purchase.

Reina-Marszalek 1600

By 

Reina Marszalek

Reina Marszalek

Managing Editor & Life Insurance Expert

Reina Marszalek is a former managing editor and life insurance expert at Policygenius, where she covered life and disability insurance. Previously, she was the senior editor of DoctorOz.com.

Updated December 9, 2021 | 4 min read

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When you’re shopping for life insurance, you want the best deal for the best coverage. But is that always what you’re getting? Maybe not, if you’re not able to see all of the options available to you to compare policies. You may be overpaying or being sold on expensive add-ons that aren’t right for your situation.

Here are five things you can do to make sure you’re getting the right life insurance policy at the right price.

Key Takeaways

  • Compare policies to make sure you’re really getting the best rates.

  • Use an independent broker that works with multiple insurers and isn’t biased toward a single company.

  • Get only the coverage you need and think carefully about expensive extras.

1. Read the fine print on discounts

Problem: When you’re presented with a “special” rate that appears to be discounted, it’s only natural to assume you’re saving some cash and making the right choice. But sometimes, a discount is actually applied to a life insurance policy that’s more expensive in the first place. You might get a better deal with a “non-discounted” rate from a different company that’s attached to a less expensive policy.

Solution: The only way to guarantee you get the best possible rate and policy is to choose an independent broker who works with multiple insurers and does not have a vested interest when it comes to pushing a particular company.

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2. Compare rates across carriers

Problem: As you move through the life insurance shopping process, you will soon learn about health classifications and how they impact your premiums. The better your classification, the lower your rates will be.

But, every company evaluates different health and lifestyle risks in its own way; you may be offered lower rates by one insurance company than another.

Solution: A reliable insurance broker will shop your application around to multiple insurers to confirm that you are getting the best health classification and rate. However, you’re only able to confirm your rates after you’ve gone through the underwriting process, which typically consists of a medical exam and a review of your medical records and prescription history.

Policygenius can help you compare life insurance quotes online from top-rated insurers.

3. Make sure what you’re buying is actually life insurance

Problem: When you are shopping for a policy you might encounter the term “accidental death insurance” which is often advertised as a perfectly suitable alternative to life insurance. In reality, there are important distinctions between the two types of coverage.

Accidental death and dismemberment insurance (AD&D) will cover you if you die or lose a limb in an accident, but it doesn’t cover death by natural causes like life insurance does. Younger shoppers sometimes opt for AD&D insurance because they think they don’t need life insurance yet, but waiting to make the switch could be costly. The cost of life insurance increases 4.5% to 9% every year you delay buying it.

Solution: Resist the temptation to purchase accidental death insurance, even if you think it’s more cost-effective. Instead, we suggest applying for term life insurance, which is affordable and easy to maintain. Don’t delay shopping around for life insurance, even if you think you’re too young to worry about it now. The longer you wait, the more it will cost you.

4. Be wary of permanent life insurance

Problem: Term life insurance is meant to cover you for a set term or length of time and permanent life insurance provides lifelong coverage along with a cash value savings feature. But, it's 5 to 15 times more expensive than term life insurance.

A term life policy will get you more coverage for less money. Moreover, the vast majority of people won’t need insurance for their entire life, so a permanent policy will become an unnecessary expense.

Solution: Work with an independent broker who takes your financial needs into account and only recommends coverage that’s suitable for your specific situation.

It’s also generally not recommended to use your insurance coverage as an investment tool. To hit your long-term financial goals, speak to a tax or financial advisor who can help you determine the best way to invest.

5. Think carefully about expensive add-ons

Problem: Riders often add unnecessary expenses without the benefits to make it worthwhile.

Adding disability, critical illness, or long-term-care riders is often less cost-effective than buying full standalone policies instead. If you're choosing between less coverage with more riders and more coverage with fewer riders, the latter is more beneficial.

Solution: Opt for standard term life coverage if you don’t have room in your budget for the added monthly expense of riders. Consider getting individual policies instead of tacking on riders to your insurance plan, since it’s usually a better value overall.

Choosing a life insurance policy doesn't have to be complicated. Think carefully about your needs so that you can buy the coverage that's right for you and your family.

Frequently asked questions

What should you look out for when buying life insurance?

Make sure you're getting the right policy for you, rather than an expensive policy that lasts longer or has more features than you need.

How do you get the best life insurance rates?

You'll get the best rates by comparing quotes from multiple insurers. Different companies may consider you riskier than others, which translates into higher rates.

Do you need life insurance riders?

Not everyone needs to add riders to their life insurance policy, and some are included for free. Work with an independent agent to evaluate your needs.