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Life Insurance

Nupur GambhirColin Lalley 1600

Nupur Gambhir & Colin Lalley

Published November 9, 2020

What is life insurance?

Life insurance provides a tax-free lump sum of money, called the death benefit, to a designated beneficiary after your death. You choose the type of policy you need, number of years you want it to last, and coverage amount, and make premium payments to the insurance company. If you die while your life insurance policy is active, your beneficiaries can file a claim and the death benefit will be paid out to them.

Life insurance coverage offers affordable financial protection — and invaluable peace of mind — to people whose friends or family members rely on them. The death benefit can be used to pay expenses like a mortgage, utility and grocery bills, children's college costs, final funeral arrangements, long-term care, and more.

Learning about life insurance can be overwhelming – but Policygenius is here to help. We’ll help you figure out what to keep in mind when considering life insurance and walk you through the process of shopping for a policy to make sure you get life insurance right.

Do I need life insurance?

A 2020 report by the U.S. Federal Reserve Board showed that nearly 40% of adults would have trouble paying a $400 emergency expense, and 12% "would be unable to pay the expense by any means."

Does anyone depend on your income? If the answer is yes, then you probably need life insurance.

Common life insurance policyholders

  • Spouses: Marriage complicates finances, and you’ll feel better knowing your significant other has a safety net for any shared debt or future financial plans.
  • Parents: Whether you’re paying for diapers or college tuition, kids are expensive. A life insurance plan ensures they’re taken care of from cradle to college.
  • Homeowners: Mortgages are the biggest, longest-lasting debt most people will take on. A good rule of thumb is to have a life insurance policy that lasts as long as your mortgage. It's not uncommon for a policy to last 20 or 30 years.
  • Business Owners: A smart business owner will have an insurance policy so their partners can keep the company going even after they’re gone.
  • Students: Did you know that your parents may be on the hook for your debt if they co-signed your student loans? Anyone with co-signed debt should consider life insurance, even if you’re young.

→ Learn more about how to determine whether or not you need life insurance

Types of life insurance

When shopping for life insurance, most people decide between two types of policies: term life insurance and whole life insurance.

Term life insurance is the most common type; it expires after a set period of time (the term), providing protection when you need it and ending when you’ve paid off your major financial obligations like a mortgage, college tuition, and raising kids.

Term life is popular because it’s straightforward and much cheaper than other types.

Whole life insurance is a type of permanent life insurance. That means it doesn’t expire; it also has a cash value component, which acts similar to an investment account that you can borrow from.

However, this component comes at a cost, and whole life insurance is substantially more expensive than term life. This can be helpful for some complex financial situations, but most people won’t benefit from the extra cost.

Other types of permanent life insurance include:

The type of life insurance is a major factor in determining how much your policy costs, how long it lasts, and which company you should go with, so it’s important to understand which is right for you and your family.

→ Learn more about the different types of life insurance and how they work

Life insurance rates

A major part of choosing which type of life insurance you need is the monthly premium rate you’ll pay.

So how much does life insurance cost? That depends on a number of factors, including:

  • The policy details: The type of policy you choose, along with the term length and coverage amount, influences the cost of your policy
  • Your health: Life insurance is all about risk, so the healthier you are, the cheaper your policy will be. If possible, buy life insurance when you’re feeling your healthiest.
  • Your age: The cost of a policy increases at a rate of 8-10% each year you put off buying one.
  • Your hobbies: Dangerous hobbies, like skydiving and scuba diving, may raise your rates.
  • Your gender: In general, men pay more than women for comparable policies.

→ Learn how to determine how much life insurance coverage you need

While life insurance premiums – the amount you pay to keep your policy active – vary from person to person, in general, whole life insurance is more expensive than term life, by an average of 10-15x.

Older shoppers, less-healthy applicants, and men also tend to pay more.

→ Learn more about what determines life insurance rates

Average life insurance rates by age

Age / Sex

$250K

Coverage Amount

$500K

Coverage Amount

$1M

Coverage Amount

25 years old

Female
$14.22
$21.20
$34.49

25 years old

Male
$17.08
$27.01
$45.17

35 years old

Female
$16.46
$25.39
$42.48

35 years old

Male
$18.66
$30.23
$51.55

45 years old

Female
$28.31
$47.44
$86.30

45 years old

Male
$35.25
$60.74
$113.33

55 years old

Female
$60.15
$107.72
$206.37

55 years old

Male
$83.54
$150.92
$286.53

Based on internal actuarial rate tables for eleven life insurance carriers that offer policies through the Policygenius marketplace (AIG, Banner Life, Brighthouse, Lincoln Financial, Mutual of Omaha, Pacific Life, Principal, Protective, Prudential, SBLI and TransAmerica). Current as of November 1, 2020.

You can compare life insurance quotes online for free to get an estimate of how much you'll pay for your policy or use our free calculator below to learn how much your life insurance will cost.

How to buy life insurance

Now that you’ve considered everything that goes into choosing a life insurance policy, it’s time to actually start shopping.

The life insurance application process usually takes four to eight weeks from start to finish. But you can complete it in just seven steps.

Here’s how it works:

  1. Get a free life insurance quote. Comparing rates from different insurance companies allows you to make sure you’re getting the most affordable policy. Policygenius helps you compare multiple quotes at once for free so you can get the best price.
  2. Choose a life insurance policy. Take into account the life insurance costs and the amount of coverage you need, along with the insurer’s reputation and average application time.
  3. Fill out an application. You can fill out your application online or call a licensed expert to get help. Either way, you’ll need to answer some basic income and health questions.
  4. Take a medical exam. Life insurance medical exams are similar to a basic physical. The exam is free, and a technician will come to your home or workplace on your schedule. If you’re looking to speed things up or avoid needles, see if you qualify for a no-exam policy.
  5. Complete a phone interview. An insurance agent will ask you a few simple lifestyle and health questions.
  6. Wait for approval. A life insurance underwriter will use all the collected info to decide on a final premium rate, which should be similar to the quotes you received. This can take up to six to eight weeks, but some companies offer instant decision policies and you can be covered in hours.
  7. Sign your life insurance policy. After you sign your policy and send your first premium payment, your life insurance will be active and your loved ones will be protected!

→ Learn more about how to buy life insurance

Choosing the best life insurance company

Want to know a secret? For most people, the cheapest life insurance policy that fits their coverage needs is the best one.

But some insurers differ in how they assess people of different ages or with different health conditions. That’s why it’s important to compare – if a policy is too expensive at one company, a comparable policy may be affordable at a different company.

You can also look at a company’s customer satisfaction and financial strength ratings to help make your decision.

So which life insurance company is the right one for you?

Don’t worry – we’ve done the heavy lifting. Learn about what types of policies each company offers, how much they cost, and the company’s financial strength reviews of life insurance carriers.

→ Check out our full breakdown of the best life insurance companies in America

Why trust Policygenius?

The market, right here. At Policygenius, you can compare all of the nation's top-rated life insurance companies side-by-side in one place. Shoppers can save up to 40% by making sure they're choosing the right company at the right cost.

The right advice. Not sure where to start? Policygenius provides unbiased reviews and ratings, along with expert advice from licensed agents who don't work on commission.

Right in your corner. We always fight for you - not the insurance company. Our experts will always advocate on your behalf to find the right fit at the lowest price, and we'll be with you through every step of the process.

How we’ve helped American families

$60 Billion

in coverage

30+ Million

shoppers helped

$1500

average saved /yr

We’re independent, so you can depend on us.

When you buy a policy through us, the insurance company pays the commission to Policygenius, not to the individual insurance agent who helped you. When your agent earns a salary instead of a commission, you can trust they're selling you only what you really need.

Because we work with all the biggest life insurance companies, we're not tied to any one carrier. Our goal is to match each person with the policy that's right for them - no matter who it's with. That means we're able to put shoppers first, every time.

→ Why Policygenius? Learn more.

Need help?
Policygenius’ licensed experts can help you from start to finish so you can feel confident and comfortable with your life insurance decisions.

→ Get started with a free quote

Policygenius customer reviews

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Frequently asked questions

How can I get the most affordable life insurance?

Term life insurance is the cheapest option for most people, so that’s a good starting point when looking for the most affordable policy.

Regardless of the type you buy, compare companies to make sure you’re choosing the one that’s best for your particular health details and financial situation.

What are the advantages of life insurance?

Life insurance provides peace of mind for you and your family. Term life is an affordable form of financial protection, and it costs as little as $20-$25 a month for some people.

The death benefit is usually tax-free, so your family gets the entire amount. Life insurance can be purchased online, and the entire benefit is available as soon as the policy is active - there’s no waiting period.

What happens if my policy costs more than I was quoted?

Policygenius is proud to provide industry-best life insurance quotes. But sometimes information uncovered during the application process means your policy will cost more than expected.

When this happens, we’ll shop your application around to our partner insurers and negotiate to get you the best possible price – guaranteed.

Will the insurance company ever not pay out the death benefit?

If your policy isn't active when you die - you outlived the term, let it lapse, or canceled it - you're no longer insured and the company won't pay the death benefit.

Additionally, during the first two years of the policy the company can refuse to pay in cases of suicide, and can also investigate any death for evidence of fraud; if found, they may pay out only a portion of the benefit, or none at all.

I have group life insurance through my employer. Do I still need a private insurance policy?

Group coverage is a popular workplace perk but often falls short in two ways: It limits your coverage amount, and it isn’t transferable if you switch jobs. A private insurance policy allows you to customize your coverage and stay protected for as long as you need it.

Already have group life insurance? Let our experts help you find the right supplemental policy to complete your coverage.

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Insurance Expert

Colin Lalley

Insurance Expert

Colin Lalley is the Associate Director of SEO Content at Policygenius in New York City. His writing on insurance and personal finance has appeared on Betterment, Inc, Credit Sesame, and the Council for Disability Awareness. Colin has a degree in English from the University of North Carolina at Chapel Hill.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.