Insurance

How To Buy Life Insurance Life insurance is meant to help complete your financial plan, but buying life insurance can be a confusing experience. Luckily, we’ve outlined eight steps you should take to purchase life insurance. Life insurance is meant to help complete your financial plan. While you help to pay for all the things your family needs in life, life insurance can allow you to continue paying for those same things after death. The life insurance death benefit helps protect your beneficiaries from shouldering an immense financial burden, and can pay for college, dependent care, and other debts that you may have incurred while alive that your family could be responsible for. But buying life insurance can be a confusing experience. Luckily, we’ve outlined eight steps you should take to purchase life insurance. Learn the life insurance vocabulary. Determine how much life insurance you need. Get a free quote and pick a life insurance policy. Collect the documents you need to get started. Complete the application and phone interview. Get a medical examination. Wait for underwriting approval. Sign the documents and pay for your policy. 1. Learn the life insurance vocabulary. Wading through the morass of life insurance know-how means picking up a bunch of new vocabulary words. Knowing what these words mean is half the battle, because you’ll be better equipped to choose the best life insurance policy for your needs. Here are some of the most important terms: Death benefit — The amount of cash paid out to your beneficiaries when you die, if you’ve been keeping up with your premiums. It’s one of the most important considerations you make when taking out a policy, as you want it to be high enough to help cover your family’s expenses when you’re gone. Premium — The amount you pay monthly or annually to keep your policy in effect. Some life insurance types accrue a cash value that can be used to pay your premiums, but those cash value life insurance policies usually have higher premiums in the first place. Term — The period your life insurance policy lasts, as long as you’ve been paying the premiums, if you buy a term life insurance policy. Other types of life insurance, such as permanent and other cash value life insurance lasts your whole life instead of just a term. Beneficiary — The person or persons, or some entity like a business, charity, or trust, that you list on your life insurance policy to receive the death benefit after you die. You should list a primary beneficiary as well as contingent beneficiaries in case the primary beneficiary is unable to receive the death benefit. Policy — The policy is the document that you receive from your life insurance company explaining the details of your coverage, including how much the death benefit will be and what you’ll pay in premiums. It will also list the conditions that must be met for the death benefit to be paid out, and failure to meet those conditions could cause a delay in a payout or cancel it entirely. Coverage — Coverage is the amount of the death benefit that gets paid out. Coverage can also include other value components, like the cash value of certain life insurance policies that can be redeemed or borrowed against before death. In addition to learning the vocabulary, have a look at Policygenius’ guide to the different types of life insurance to help you choose the policy you need. 2. Determine how much life insurance you need Before you shop around for a life insurance policy, take stock of the expenses you have and expect to have in the future. Remember, the purpose of life insurance is to help make sure your family isn’t left paying for those expenses on their own. If you’re married, you want to leave a financial cushion for your spouse. But you also want to make sure that they can continue to pay off the loans you co-signed. If you have a mortgage with your spouse, your spouse could lose the house if they are unable to keep up with the payments. So make sure you factor in any debts that your spouse may have to cover when determining how much you need. If you have kids, take stock of what child care costs right now. The amount you currently put toward child care should be factored in when determining how much life insurance coverage you need. However, you’ll also want to account for expenses in the future, like your children’s college tuition. You’ll want to make sure you leave enough behind for your spouse to cover your kids education expenses. Add up all these costs to get a sense of what you’ll likely need to replace after you’re dead. Your death benefit should encompass the entire dollar amount minus any liquid assets you already have that your family can use to make up some of the financial shortfall. A typical breakdown looks like this: OBLIGATION COST RESOURCES After-tax income $32,500 Assets $20,000 EXPENSES Five years of support at $32,500/year $162,500 Raising two kids, ages 3 and 5* $1,176,147 End-of-life expenses $10,000 Total expenses $1,348,647 DEBT Credit card debt $5,000 Auto loan $3,000 Mortgage $500,000 Total debt $518,000 Total financial obligations (Expenses + Debt) $1,856,647 Total financial obligations minus assets (Coverage gap) $1,836,647 RECOMMENDED COVERAGE $1,840,000 *Assuming each goes to a private, out-of-state, four-year university, plus childcare expenses For more tips and information, see Policygenius’ full guide on how much life insurance you may need. 3. Get a free quote and pick a life insurance policy Getting a quote is easy. You can do it using Policygenius’ coverage calculator with just a few pieces of personal information, like your location, age, gender, and basic medical history. Getting a quote shouldn’t take you much more than 10 minutes. Using an independent insurance agent or broker, you can get quotes from a number of different insurers right under one roof with just a few pieces of personal information, like your location, age, gender, and basic medical history. These quotes will feature your premiums and the amount of coverage you’ll receive, and you can compare and choose the one you need. You can also adjust some of the numbers in the Policygenius calculator until you hit upon a premium-to-coverage ratio that fits more in line with your budget. Most people pick the cheapest policy that has the coverage they need, but it’s important to compare other features, like what features and riders a company offers, their customer service and other ratings, and whether or not they’re best for your particular health profile. Compare beyond price to find the best life insurance company for you. With Policygenius, you can compare your various life insurance options side by side for free. If you’re unsure of which insurance carrier you should go with, be sure to check out Policygenius’ insurer reviews, which can help you satisfy concerns you may have, such as whether an insurer has good customer service or lets you make modifications to your coverage online. 4. Collect the documents you need to get started You can make the application process as seamless as possible by having all the documents you need on hand before you apply. These include: Proof of identity, citizenship, and age, like a driver’s license, birth certificate, or a valid passport. Noncitizen residents can use their green card (permanent resident card) or an employment authorization card. Proof of income. You can use pay stubs, a letter of employment, a tax return, or an earnings statement from your bank if your primary income is from interest or rent. If you’re unemployed, an unemployment letter or monthly statements describing your unemployment benefits will work. Proof of residency. For renters, that could be your signed lease or a rent receipt. For homeowners, your mortgage bill or a property tax statement will suffice. Insurers will also accept a utility bill or a postmarked envelope with your return address on it. 5. Complete the application and phone interview Getting a quote is an application in that you had to hand over basic information. But the actual application is a little more in-depth. That could mean providing your Social Security number, which the insurers need in order to check whether you’ve applied to other policies with other insurers and to confirm what you reported in your medical history against prescription drug databases like the Medical Information Bureau (MIB). The application may also ask for a driver’s license number to see if you’ve been involved in any accidents. You’ll be asked to authorize your doctor to share your health information with the life insurance company, known as an attending physician statement (APS). This information is necessary to not only get you the correct policy but could also come into play later when the insurer is paying out your death benefit. If you have any medical conditions that should’ve affected your premiums, the insurer may recalculate the amount they owe to your beneficiaries to account for the missing information. Some life insurance carriers will still want to hear from you by scheduling a phone interview. The purpose of the phone interview is to confirm the contents of your application (the “application quality check”) and may include additional questions about your hobbies and lifestyle. If you’re the kind of person who attempts to jump the Grand Canyon on a motorcycle, you can probably expect to pay a little more for your life insurance coverage. Be prepared for questions about your financial health, including your income and net worth, as well as about other life insurance policies you have. At this point, your premium is still an estimation. Everything that comes next will gauge the accuracy of the information you provided to make sure you pay the right amount in premiums after your policy goes into effect. 6. Get a medical examination The life insurance medical exam is meant to get an in-person look at your health. It’ll be just like going to the doctor’s office for a checkup, except that you can have the medical examiner come to your home or office. The technician or nurse will take basic measurements like your height and weight, blood pressure, and pulse, as well as draw a blood sample. Sometimes you’ll also be asked to provide a urine sample. The insurance medical exam is free for you and should take about 30 minutes. You’ll have to schedule the appointment time with your life insurance company, usually during your phone interview, and someone from the medical testing company will get in touch if they need to reschedule or cancel. Although the procedure might seem a little burdensome, you can use the same results on other life insurance applications up to about six months later if you don’t ultimately go with your first choice of carrier. You can also ask the testing company or the life insurance company for a copy of the results, effectively scoring yourself a free medical exam. If you’re young and healthy, you may qualify for simplified term life insurance, which doesn’t require a medical exam. If you’re fine with the small coverage amount (usually a maximum of $250,000), then this form of no-medical-exam life insurance could save you a lot of money on premiums. 7. Wait for underwriting approval The hard part is over. Now all you have to do is wait. But what’s happening behind the scenes is that someone called an underwriter, who works for the insurance carrier, calculates how risky you’re going to be to insure. The underwriter’s job is basically to confirm whether you actually get the rate you were originally quoted, and this process can take up to six to eight weeks. During underwriting, the underwriter will look at the results of your medical exam and the data you submitted with your application. They will cross-reference what the insurer knows about your medical history with what’s in the MIB, looking as far back as seven years ago to see what medications you’ve been prescribed. The underwriter will also learn whether you’ve ever been convicted of a DUI/DWI or reckless driving as well as other traffic offenses. To determine how much your premiums will cost, insurers use a health rating that will be affected by the results of your medical exam. Some medical conditions that could cause a downgrade in your health ratings, and thus an increase in the premiums you’ll have to pay, include high blood pressure, high cholesterol, and tobacco use. The most common life insurance classifications, in order from highest health rating to lowest, are Preferred Plus, Preferred, Standard Plus, and Standard. People whose health ratings are even worse than the Standard classification are assessed with a table-rating system. 8. Sign the documents and pay for your policy. Once the underwriter completes his or her work, you officially own a life insurance policy. All that’s left is for you to receive the policy and sign it. This is your chance to confirm all of the details of the policy you discussed with the insurance agent or company during the application process, the most important of which are your premiums and coverage. While the death benefit will usually stay the same, your premiums could have gone up or down depending on the assessment of the underwriter. In addition to signing the policy, you also authorize a method of payment in the appropriate section. During the application process, you decide to pay either a monthly or an annual premium (with the latter usually offering a small discount), and this should also be indicated on the policy. You can always change the frequency of payment after the policy is in force by contacting your insurance company. Once you sign the policy, you’ll need to mail it back to the insurer. Yes, even in the age of artificial intelligence and driverless cars, you still need to use the post. (Some insurers will let you make changes to your policy online, like updating your personal information or beneficiaries.) Make sure to keep a copy of the policy in a safe place, and let your beneficiaries know exactly where that place is and how to access it. If your beneficiaries don’t know about the policy, they won’t know to claim the death benefit you’ve been paying for all this time, and having easy access to the policy will help them claim the payout as soon as possible. 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. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.

What Is A Life Insurance Beneficiary? If you have an active life insurance policy when you die, your insurer will pay out a death benefit. The person or organization you choose to receive the death benefit is called the beneficiary. If you have a life insurance policy, and you’ve been keeping up with your premiums, your insurer will pay out a death benefit when you die. The benefit goes to someone who you designated with the insurance company, such as your spouse. That person is called a beneficiary. Your life insurance beneficiary can be a family member, a friend, a business partner, a charitable organization or a legal entity like a trust or your estate. While the beneficiary is your choice, some states have laws that regulate who you can name as a beneficiary. You can also name multiple people as beneficiaries and choose to have the death benefit distributed among them. Read on to learn about the different types of beneficiaries, who can be a beneficiary, and the roles and responsibilities of the beneficiary. In this article, we’ll cover: Primary and contingent beneficiaries. Who can be a beneficiary. How to update your beneficiaries. How a beneficiary can claim the death benefit. Can a life insurance beneficiary get denied the death benefit? Naming your life insurance beneficiary is a big decision, so we recommend consulting with an estate planning professional for guidance Primary And Contingent Beneficiaries Your primary beneficiary is the original person or organization you designate with the insurer to receive the life insurance benefits when you die. Most people designate their spouse. You can also name multiple beneficiaries and determine how much each one gets. If you don’t choose any primary beneficiaries, the insurance company will pay out your benefit to your estate. This can significantly slow down the disbursement of life insurance benefits because your benefits are subject to probate, which is when the courts determine who should get your assets. You may also have to pay tax on your life insurance benefit if it goes to your estate. You’ll also want to choose some contingent beneficiaries. A contingent beneficiary is someone you elect to receive the death benefit if the primary beneficiary dies or goes out of business before you die. Although the contingent beneficiary is named in the life insurance policy, they won’t receive a portion of the death benefit if any of the primary beneficiaries are still alive. The first contingent beneficiary you name is called the secondary beneficiary, the third is the tertiary beneficiary and so on. Who Can Be A Beneficiary Your Spouse Most people choose their spouse as their primary beneficiary. Life insurance is meant to help protect your family from financial hardship after you’re gone, so by leaving money to your spouse, you can help ensure that they won’t struggle with paying the bills or for your kids’ college. Additionally, nine states have “community property” laws that make it illegal to name someone other than your spouse as your beneficiary without their consent. These laws generally apply only if you got the policy after getting married. These states have community property laws: Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin Alaska and Tennessee also have community property laws, but they are voluntary. You and your spouse have to opt in to them. Your Kids We don’t recommend naming your children as beneficiaries if they’re still minors. It’s very difficult to pay out such a large sum to a child without jumping through some legal hoops. If you designate a minor as your beneficiary, when the insurer pays the death benefit, it will go into a trust overseen by a court-appointed guardian. That guardian will hold onto the money until the child reaches the “age of majority.” You can also designate a trust in the child’s name as the beneficiary, and the fiduciary in charge of the trust will pay out the benefit when the child becomes eligible. Nonrelatives You can designate a business partner or even just a friend as a beneficiary. Remember, your beneficiary can be anyone you want, with one exception: If you live in a community property state, you will need to get consent from your spouse in order to pay the benefit to someone else. Organizations Your beneficiary doesn’t have to be a person. You can direct your life insurance policy to pay out to an organization, such as your business. Many people select an organization as their beneficiary if their family is already well-off. A sudden injection of cash can help any business manage the loss of an employee or owner. You might also consider a charity or nonprofit. These organizations often operate with tight margins, and you can help further their mission by naming one as a beneficiary of your life insurance policy. A Trust Another way to leave an insurance benefit to your intended beneficiary is by having the insurance company pay out to a trust. Trusts are also useful because if you’re considering an unusual choice as your beneficiary, you might run into resistance from the insurer itself. In that case, you can name a trust as your beneficiary so that an appointed conservator can receive and disburse the money on your behalf. People have even used trusts to effectively leave money for their pets. You would accomplish that by naming someone to inherit the pet in your will, and then establishing a trust to pay for the pet’s care using the money from the insurer. There are multiple types of trusts, like irrevocable and revocable living trusts, and you might not even need one depending on what assets you have and what’s in your will. How To Update Your Beneficiaries You can change your life insurance beneficiaries at any time by contacting your life insurance company. Common reasons to change beneficiaries include getting married, getting divorced, or if your original beneficiary dies. How you actually update your life insurance beneficiaries will depend on which carrier you have your policy with. Some allow you to update beneficiaries online. Others require a phone call or for you to fill out a paper form that you either mail or fax. How A Beneficiary Can Claim The Death Benefit The beneficiary needs to do a few things before the insurer pays out: Get a copy of the death certificate. This proves that the claim is legitimate. Find the policy document. This paper has the details of your life insurance policy. You should have this document in your records and you should always make sure your beneficiaries know where to find it. Otherwise they may have to call up insurance companies to find the one that insured you. File a “request for benefits”, or claim form, with the insurer. How The Beneficiary Gets Paid Once a beneficiary finds the right paperwork and correctly submits the claim form, they will get paid the death benefit. This is the amount of insurance coverage you purchased. So if you had a $1 million policy, your beneficiary will receive $1 million (with rare exceptions). There are two options for how to receive the money: Lump sum. Your beneficiary can request the entire amount all at once. That’s useful if he or she has any immediate expenses to cover, like your funeral or mortgage payments. The best part is that it’s typically tax-free. Installment or annuity. Your beneficiary can also request to receive the payments in monthly or annual installments. This might be beneficial if they think it’ll be easier to manage, or if they know their spending habits are less than thrifty. Installments can be spread out across five to 40 years. Can a life insurance beneficiary get denied the death benefit? There are a couple of scenarios where the life insurance carrier may deny your beneficiary’s claim to the death benefit. If your beneficiary is suspected of foul play, the insurer will (hopefully) reject their claim. Thanks to “the slayer rule,” most states won’t pay the benefit if there’s any evidence against the person trying to claim it. The insurer may also deny your beneficiary if you die of a disease that you didn’t mention in your application or that was caused by something you didn’t mention. For example, if you die of esophageal cancer, but you failed to mention your smoking habit on the life insurance application, the insurance company could withhold the death benefit. Similarly if the insurer finds out you died from a previously undisclosed risky hobby, the insurer could recalculate your premiums to the amount it believes you should have been paying and subtract that amount from the payout. Ultimately, there are many reasons why a life insurance beneficiary may be denied the death benefit. Make sure to check-in with your life insurance provider about what scenarios may fall under this category. 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. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.

Do I Need Disability Insurance? Most people overlook disability insurance. Here's a guide to why you might need it, along with what kind and how much. While most people see the benefits of life insurance or health insurance, disability insurance is often overlooked. But it can be just as important a part of your financial plan as other types of insurance. Disability insurance helps ensure you have income coming in to help protect your financial plans even if you’re sick or injured. It’s not just about knowing that you need disability insurance, but what kind of disability insurance policy is right for you. Read on to learn about: Who needs disability insurance What kind of disability insurance you need (and don’t need) How much disability insurance to get Who needs disability insurance? If you work, have people relying on your income, and aren’t financially able to go years, or even just months, without a paycheck, you should consider disability insurance. Why might you need it? Because most people rely on their paychecks to pay bills and support their families, they would benefit from having disability insurance to cover these responsibilities if something prevented them from working. Consider the following: Over 25% of American workers experience a long-term disability longer than three months at some point in their careers. 69% of workers have no long-term disability insurance coverage. 66.5% of all U.S. bankruptcies stem from illness or injury-related medical issues. You may think that disability insurance is just for accidents and that you’re not at risk if you don’t work a dangerous job. However, 90% of long-term disabilities result from illness rather than accident, meaning they can affect you no matter what you do for work. Even white collar professions like doctors and lawyers likely need disability insurance — in fact, because of the expensive educational investments in these fields, they benefit even more from disability coverage. If you don’t have disability insurance, you can risk not being able to cover everyday expenses, pay regular bills, or keep up with your larger financial plan. Disability insurance helps protect your ability to earn an income and should be considered a part of every financial safety net. What kind of disability insurance might I need? Once you realize you need disability insurance, you need to decide what kind of disability insurance. Most provide the same sort of protection but under very different circumstances, so it’s important to choose the right one. The options available to most people are: Long-term disability insurance Short-term disability insurance Employer-provided disability insurance Social Security disability insurance Workers’ compensation Do I need long-term disability insurance? Long-term disability insurance (LTD) should be the first option for most people looking to protect their income. LTD provides income when you’re unable to work for at least two years, and can last all the way to retirement. A great part about long-term disability insurance is that, for the most part, benefits are distributed tax-free and can be used on whatever you need them for. You have the freedom to use it as needed and can maintain your lifestyle. Long-term disability insurance can be the most cost-effective form of protection you can get. When it comes to length of coverage, benefits received, cost, and ease of qualification, LTD can give you more for your money. Do I need short-term disability insurance? Some people would rather purchase a short-term disability policy instead, thinking that they’ll recover soon and won’t have to pay for a long-term policy. But most short-term policies max out at six months of coverage, well short of the 36 months an average disability lasts. The monthly premiums for short-term disability are also relatively close to those of LTD. Considering you get much more coverage with LTD, it can make it the more cost-effective product. It’s also typically easier to buy long-term disability insurance. You can go to essentially any insurance company and buy an LTD plan, but there are relatively few options for buying a private short-term plan. Which brings up a time when short-term disability insurance might be worth it: if you can get it subsidized by an employer. Some workplaces offer subsidized short-term disability insurance, making the cost cheap or even free. If this is the case for you, you should consider it. Short-term disability insurance can complement LTD by providing coverage before your long-term benefits kick in, but if you have to foot the entire bill yourself it’s likely not worth the cost. Do I need disability insurance alternatives? While LTD is a good choice, and short-term policies can work in the right circumstances, there are other forms of disability insurance that you should be wary of because they can leave you unprotected in the long run. Employer-sponsored long-term disability insurance: Like short-term disability insurance, if you’re able to get LTD subsidized through your employer, it’s worth looking into. However, it probably isn’t a good replacement for a private long-term policy. The coverage amount through an employer plan can be limited, and it’s tied to your employment so you’ll lose coverage if you leave the job for whatever reason. A private policy is portable and will follow you to any employer you’re with. Social Security disability insurance (SSDI): SSDI is used as an excuse for not buying a private disability policy, but most people don’t realize the limitations of SSDI. It’s extremely hard to qualify for, largely because you have to be unable to work at all, rather than just unable to work in your profession. Even for people who do eventually qualify, it can take appeals and many years, and the benefit amount is relatively low. Workers’ compensation: Many people have workers’ comp through their employer, but this only covers disabilities that occur on the job. That means it only kicks in in a small portion of incidents and shouldn’t be relied on for comprehensive coverage. How much disability insurance might I need? Once you’ve determined that a) you need disability insurance and b) long-term disability insurance is likely your best option, you have one final needs-based decision to make: how much you need. You should take three things into account when determining how much additional protection you need: Coverage amount: Long-term disability benefits will pay around 60% of your gross monthly salary, short-term disability benefits up to 80%, and SSDI pays under $1,200 a month. Make sure your benefits cover any bills and immediate expenses, but don’t forget about savings and long-term plans like retirement that require investment as well. Duration: The average disability lasts for around three years. A long-term insurance disability policy that lasts five years should be the minimum duration, but a policy that lasts until retirement provides the maximum protection (and usually isn’t much more expensive than a five-year policy). When determining how long benefits should last (known as the benefit period), you should also consider when they start. This is called the waiting period, or elimination period. Ninety days is typically the most cost-effective elimination period. Cost: The amount of disability insurance you have depends in part on what you can afford. The cost is determined by coverage amount and duration, along with other factors like age, health, and gender. However, most people can expect to pay between 1-3% of the annual income on disability insurance. SSDI and workers’ compensation are free, and employer-sponsor disability benefits are subsidized, but be sure to factor in indirect costs — the aforementioned limitations of these forms of protection — as well. How much disability coverage you need depends on your individual financial circumstances, including your ability to self-insure with savings. 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. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.

How To Find Affordable Life Insurance Buying cheap life insurance doesn’t have to mean skimping on coverage. Knowing how companies set rates means you can take the right steps to finding an affordable life insurance policy. Life insurance is a crucial part of a financial safety net. But in addition to getting the best life insurance coverage, you also want to find an affordable life insurance plan. It may seem like there has to be a tradeoff between finding a cheap policy and a comprehensive one, but there are things you can do to help you find an affordable policy. In this article, we’ll discuss how to: Buy life insurance early. Buy a term life policy. Get the right amount of coverage. Understand the underwriting process. Choose the best life insurance company for your situation. Compare quotes. Don’t be afraid to use a broker. Buy life insurance early. Life insurance isn’t usually a top priority for young people, since they might not have mortgages, dependents or the same financial responsibilities that older people might have. But one big way to help yourself get cheaper life insurance is to buy early. Life insurance is almost always cheaper the younger you are when you buy it. Rates rise an average of 8-10% every year you put off applying. Plus, when you buy young, you lock in premium rates for the entire duration of the policy. That means you’ll be paying the same low insurance premiums decades later. The following table demonstrates how the monthly cost of a term life insurance policy increases as you age, based on three coverage amounts. These numbers reflect the average monthly premiums for men. Average rates for women are generally lower. Average Life Insurance Rates By Age AGE $500,000 $750,000 $1,000,000 30 $25.97 $36.25 $43.94 35 $27.26 $38.18 $47.37 40 $36.68 $52.28 $65.32 45 $58.22 $84.75 $108.15 50 $87.81 $129.13 $167.06 55 $140.95 $208.85 $257.14 60 $233.36 $347.46 $456.42   This explainer gives an in-depth look at life insurance rates by age and the benefits of buying young. Shopping for life insurance over 50. Even though you’ll typically get better rates if you buy when you’re younger, you may still need to buy insurance later on in life. While it will inevitably be more expensive, it’s still possible to find low-cost life insurance, especially if you’re healthy. One way to find an affordable insurance policy is to look for a smaller benefit amount and shorter term length than you would if you were buying in your 30s. Now, this doesn’t mean you’re giving up the coverage you need in order to save money. Because you have fewer, if any, dependents, you likely just don’t need as much coverage as you would have needed decades earlier. So consider a smaller policy, such as one that lasts just until your mortgage is up. This guide will help you determine what length of benefit you actually need. You can also look into types of no-medical-exam life insurance, like simplified issue or guaranteed issue life insurance. These allow you to apply for a life insurance plan without getting a medical exam. They can be more expensive than a typical term policy, but they’re still a good option for some older or less-healthy applicants because they have less-stringent health qualifications. If you’re an older applicant, start your search by learning more about the best life insurance for seniors. Buy a term life policy. In almost every case, term life insurance is the most affordable option. It’s also the most straightforward type of life insurance; it provides only a death benefit, without any additional investment components, and it expires after a set period of time. Because you can choose whichever term length works for your situation, you only pay for the insurance coverage you want. If you’re in your mid-30s, you could realistically take out a 20-year, $1 million term life policy and pay insurance premiums of about $45 per month. Affordable Whole Life Insurance Whole life insurance is a type of permanent life insurance, which means it lasts for as long as you continue paying your premiums, with no expiration date. It’s also a type of cash-value life insurance with an investment option that gains interest over time. A whole or permanent life policy can be a valuable tool for some people, especially those who have complex financial situations and would benefit from the cash value. However, the investment component and maintenance fees make whole life insurance rates up to six to ten times as expensive as term life. If you do want a whole life policy, the best way to find an affordable policy is to be smart about the coverage you need, the company you choose, and your overall health. Long-term Care Insurance The majority of people who turn 65 will need some form of long-term care and the U.S. Department of Health & Human Services, estimates an average cost of $138,000. So while a death benefit can help your loved ones after you pass, you may also need to pay for care before you pass. That’s where long-term care (LTC) insurance comes in. LTC insurance helps you pay the costs associated with chronic illnesses, like Alzheimer’s, that leave you unable to care for yourself. LTC can cover nursing home costs and at-home care if you’re unable to live alone. LTC insurance can be costly so there are a couple of things to consider. For starters, ask about a long-term care rider as you look for your regular life policy. Some companies offer standalone LTC plans but they are usually more expensive than a rider and it’s harder to qualify for them. The other advice in this article also applies to getting LTC. In particular, you can save significantly by getting coverage for LTC in your 50s or earlier. By the time you get into your 60s, adding LTC to your insurance will cost you thousands more. Supplemental Group Life Insurance Another way to keep a personal life insurance policy affordable is to supplement it with employer-provided coverage. Group coverage through a workplace is a common benefit that you can get at little or no cost. The downside is that it usually won’t provide enough coverage for all your needs and it’s tied to your employment. But while an employer-provided group policy isn’t enough on its own, it can supplement a private policy. If you’re able to get, for instance, $50,000 worth of coverage for free, you can consider lowering your private policy (and thus your monthly premiums) slightly to make it more affordable. Get the right amount of coverage. It’s easy to overestimate the amount of life insurance you need and buy too much, raising the cost considerably. But it’s also easy to underestimate how much you need, potentially leaving your beneficiaries on the hook. A good rule of thumb is that the insurance you need is equal to 10-12x your salary. You can estimate how much coverage that means for you by using a free life insurance calculator. You can also crunch the numbers on your own if you prefer. Either way, make sure to consider all of your financial obligations when choosing a benefit amount and term length. For example, take the following into account: Existing debt, like a mortgage or student loans. Future college plans (for you, a spouse, or a child). Dependents, including children and aging parents. Any financial cushion you want to leave behind. Final expenses, like end-of-life medical care or funeral costs. Consider the ladder strategy. One tricky situation when it comes to how much life insurance you need is that your coverage needs decrease over time: your mortgage debt decreases, you need to provide for kids for less time, and so on. By using the ladder strategy, you can get the coverage you need while ensuring you’re not paying for coverage you won’t need later in life. With the ladder strategy, you buy multiple policies of varying coverage amounts and term lengths. As the decades pass, some policies will expire, and at the end you’ll be paying for a small policy that covers your current needs and nothing extra. Policyholders can spend up to 50% less on life insurance by laddering smaller policies versus buying one larger policy. Understand the underwriting process. Life insurance companies largely set the price of policies through the underwriting process. This is where they determine how risky an applicant is to insure by using: Your current health and medical history. This is done primarily through a paramedical exam and a request for documents from your doctor. Motor vehicle reports that show your driving record. A phone interview with you to find out if you have any dangerous habits (like smoking) or hobbies (like rock climbing). At the end, the underwriter will assign a classification to you that determines your policy cost. There isn’t anything you can do to change what happens in the underwriting process, but knowing beforehand what insurance companies look for can help you take steps to lower your insurance costs. For example, a health condition like diabetes can result in more expensive life insurance. But with certain steps to manage your condition, like taking the proper medication or treatments, insurance carriers may lower your premiums. Before you apply for life insurance, help yourself by taking a minute to learn more about what happens during the life insurance underwriting process. Choose the best life insurance company for your situation. Life insurance companies use your health to determine your policy cost, but not all carriers treat health conditions the same way. One common example is that certain companies offer better rates than others for former or current smokers. Certain companies also offer better rates for people of certain ages, military personnel, high-net-worth individuals, recovering alcoholics, those who recently lost weight, people with high blood pressure, or individuals with certain types of cancer. These differences between companies are why the best life insurance company for you is usually the one that is most accommodating to your health situation. Going with the wrong one can cost you thousands of dollars over the decades you own the policy. To see which companies offer comprehensive and  affordable life insurance coverage based on specific factors like your age, lifestyle, or health circumstances, see our page on a few top life insurance companies. Compare quotes. Taking all of the above into account — coverage amount, type of policy, company differences — can feel overwhelming. But if you want the best insurance rates, it’s also crucial to compare life insurance quotes for different plans. An easyway to quickly compare quotes from multiple insurance carriers is with an automated process like Policygenius. Otherwise, you will need to do all of the above — figure out what type of insurance you need, the death benefit size, which company is best for a given health situation, and more — and then go to each company individually, write down their offers, and compare manually. And if you do it manually, you’ll still need to apply through the insurance carrier, another thing Policygenius helps you do quickly and without putting you through a confusing online application. Don’t be afraid to use a broker. Knowing how to get an affordable life insurance plan is important, but so is recognizing some myths about saving money. It’s untrue that you can save money by buying directly through an insurance company. Using a life insurance agent or broker does not come with additional costs. Life insurance rates are highly regulated, so the same policy cannot be offered at a discount by some parties or marked up by others. You will pay the same amount for an individual policy whether you buy from the carrier or use an independent broker. Additionally, independent brokers (like Policygenius) can help guide you through the process and answers questions you may have about how certain policies or companies compare. We’ve also debunked a few other common myths about life insurance to make sure you understand what you’re getting with your policy. 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. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.

What Is Life Insurance? What does life insurance do, who needs it, and why is it important? You might have an idea of what life insurance is. But if you were asked to define life insurance, could you do it? What if you needed to describe the different terms, provisions or types? What exactly is life insurance good for? How long does it last? Who needs it? It seems complicated, but the answers are fairly straightforward. Life insurance provides a tax-free lump sum of money to your loved ones in the event of your death, allowing them to continue toward their financial goals. It’s a value asset that gives you peace of mind that they’ll be taken care of even when you aren’t around. In this life insurance 101 guide, you’ll learn: How life insurance works The advantages of life insurance Why life insurance is important How does life insurance work? Life insurance is easy to understand once you know what questions you should be asking. If you understand the common components of an insurance policy, how to apply, the different types of policies and the costs involved, you’ll know how to get the right coverage for your family. What are common features of life insurance? No matter what type of policy you buy, life insurance consists of these four components: Policyholder The person who owns the life insurance policy. Typically, if the policyholder dies, the death benefit is paid out, but it’s possible to take out a policy on someone else. Beneficiary The person, people or institution(s) that receive money if the policyholder dies. There can be more than one beneficiary named on the policy. Premium The money paid monthly or annually to keep a policy active (or “in-force”). If you stop paying premiums, the policy lapses. Death benefit The money paid out upon the event of the policyholder. Life insurance goes into effect as soon as you make your first premium payment, meaning you’re eligible for the death benefit as soon as the policy is in force. Insurance companies always pay the death benefit, except in specific circumstances where they aren’t obligated to, like: The policyholder outlives their term life policy The policy lapses or is canceled The death occurs within two years of the policy being in-force and the insurance company finds evidence of fraud on the application How do you apply for life insurance? The life insurance application usually takes four to eight weeks from start to finish, but you can complete the process in just seven steps. Here’s how it works: Get free quotes. Comparing rates from different insurance companies allows you to make sure you’re getting the most affordable policy. You never have to pay for life insurance quotes. Choose your policy. Take into account cost, customer service and the average application time. 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 information. Take a medical exam. As part of the underwriting process, you may need to take a medical exam that’s similar to a basic physical. The exam is free, and a technician will come to your home or workplace on your schedule. Complete a phone interview. An insurance agent will ask you a few lifestyle and health questions. Wait for approval. An underwriter will take all of the information collected to decide on a final premium rate, which should be similar to the quotes you received. Sign your policy. After you sign your policy and send in your first premium payment, your policy will be in-force. What are the different types of life insurance? Not all life insurance policies are created equally. How long the policy lasts, the cost and extra provisions depends on the type of coverage. Broadly speaking, life insurance is divided into two different types: term and permanent. Term Life Insurance Term life lasts for a predetermined period of time, known as the term. When the term is up, the policy expires. This is usually the most affordable type of life insurance, and lasts only as long as you need it to cover debts and provide for beneficiaries. Permanent Life Insurance Permanent insurance doesn’t have an expiration date and lasts for as long as the policyholder pays the premiums. Permanent policies also have a cash value component that acts as a sort of investment vehicle that can be borrowed against. The cash value portion, along with fees, raises the price of permanent policies compared to term. Permanent life insurance policies include whole, variable, universal and variable universal life. Whole vs. Term Most shoppers have to decide between term and the most popular type of permanent life insurance, whole. Term life is the right choice for a majority of people because it’s affordable and straightforward. However, whole life, with its cash value and permanent status, can be useful for people with complicated finances. A licensed expert can help you decide which is the best option for you. How much does life insurance cost? The actual cost of life insurance depends on a number of factors, including where you live, your age, your health and health history, your financial history and your hobbies. And, of course, the coverage amount, type and term length (if applicable) of the policy plays a role in setting rates, too. Different insurance carriers weigh these factors differently, which is why it’s important to compare quotes from multiple companies to make sure you’re getting the most affordable rate. What are the advantages of life insurance? There are many benefits of life insurance that make it a necessary part of any financial plan. No matter how you use it as part of your safety net, you can count on the following. It provides money tax-free. The death benefit provided by a life insurance policy is a lump sum of money that’s usually tax-free. That means the whole amount goes to your beneficiaries – and they don’t have to plan their goals around receiving only a portion of the money thanks to taxes. It’s affordable protection. While the exact cost of life insurance varies, for the most part, it’s pretty affordable. Consider this: A healthy 30-year-old male can expect to pay under $40 a month for a $1,000,000 term life policy. That’s about half the cost of the average internet bill. Since it helps pay for college, a house, retirement, and more, that’s money well spent. It’s an alternative investment option. Term life insurance is straightforward, but the cash value of whole and other permanent types can act as a forced investment vehicle. You should talk to a financial adviser before deciding whether or not a permanent life insurance policy is the right path, but if you’ve already maxed out other investment options like an IRA, life insurance might work as an additional vehicle. Why is life insurance important? Financial planning is important, but if you’re the breadwinner and you die, it makes all of that planning moot. The meaning and importance of life insurance is the peace of mind it helps provide when it comes to: Protecting future plans like college and retirement for your beneficiaries Paying off debt like a mortgage or student loans Estate and inheritance planning to leave something behind for children, grandchildren, or charities Covering end of life expenses like funerals, which have an average cost of nearly $10,000 Who might need life insurance? Life insurance is a useful tool for most people, but that doesn’t mean everyone needs it. It’s often unnecessary if: You don’t have any beneficiaries. If you’re young and single, and no one is counting on you financially, you probably don’t need life insurance. But keep in mind that there are still reasons you might buy it. Life insurance gets more expensive the longer you wait to buy, so you might choose to apply while you’re young to lock in low rates. You might also want to leave money to an institution or charity. You don’t have (or anticipate) any debt. If your death won’t leave loved ones with debt, you might not need life insurance. But you should also consider future debt, like the cost of putting your kids through school or caring for aging parents. It’s important to look ahead to your life insurance needs, not just to the past. You can self-insure. Even if you do have or anticipate debt, you might be able to cover the costs simply using your own savings. If you don’t fall into one of these scenarios, you should seriously consider life insurance. If you don’t have it, you risk leaving your loved ones financially vulnerable in a worst-case scenario – something that can be easily avoidable with life insurance. 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. This article originally appeared on Policygenius, a licensed insurance broker. Betterment is not an insurance broker and this article is not insurance advice nor an offer for particular insurance products or services. The content was not written by an insurance agent, and it is intended for informational purposes only, and it should not be considered legal or financial advice. Betterment makes no warranties or representations with respect to specific insurance offerings.