How to wisely buy life insurance (2024)

Life insurance can help you leave money to your loved ones when you pass away. In return for paying premiums throughout your life, your beneficiaries will receive a lump sum payment at the time of your death.

This coverage can be helpful for a variety of reasons such as to cover your final expenses, pass on a tax-advantaged inheritance, pay off a mortgage, or continue to financially support loved ones who rely on your income.

If you're interested but aren't sure where to start, it helps to know how to buy life insurance wisely. Start by getting a free price quote so you know exactly what to expect.

Here are four tips on how to buy life insurance wisely.

1. Know your budget

Life insurance costs can vary greatly depending on factors like the policy type you choose, your age and your current state of health.

For example, the average monthly cost of a 10-year, $250,000term life policy ranged from $12.17 for a 20-year-old female up to $74.82 for a 60-year-old male, according to data reported by Progressive.

Before you get life insurance, take some time to think over how much you can affordto pay per month for your life insurance premium. It's a long-term expense, lifelong in the case of permanent policies, so you'll want to consider what you can afford both now and in the future.

Start with a free price estimate so you know what it will cost.

2. Know your goals

Once you have an idea of how much you want to spend on life insurance, a good next step is to consider why you want life insurance.

Ron Wadley, the owner and principal agent of Insurance for Texans, says to start with the end in mind by asking yourself what you want to accomplish.

"Maybe you want to make sure that your family can live stress- and debt-free if something was to happen to you. Maybe you want to make sure that your children can launch into adulthood well if you are gone. Maybe you want to use it to accumulate cash to use as income later in life. Maybe you want to fund a charity to persist after you're done," he says.

Taking the time to identify your goals is fundamental in determining the best plan for your needs.

3. Know the type you need

Next, life insurance isn't one size fits all. Different policies are designed to suit different needs.

"When buying life insurance for the first time, consumers should consider the type of life insurance policy that's right for them, such as term or whole life insurance," says Lisamarie Monaco, a licensed burial insurance specialist.

Term life insurance is a more affordable option, but it only covers you for a set amount of time — such as 10, 20 or 30 years. When the term is up, you may be able to renew your policy based on your current age and health state, but it will often result in a premium increase. If you can't renew or choose not to, the term policy will expire and no benefit will be paid.

Whole life insurance policies, on the other hand, come with a higher price tag but are designed to cover you for the rest of your life. As long as you pay your premiums and your death circ*mstances qualify, your beneficiary will receive a death benefit when you pass away. Whole policies also usually come with a cash valuecomponent that you can borrow against during your lifetime.

Along with deciding between term, whole, or another type of life insurance policy, it's important to consider an insurer's rider options.

"A rider is an optional feature or option that someone can potentially add to their policy. These features can range from guaranteed insurability to waiver of premiums and are often what sets insurance companies apart," says Michael Sparrow, a licensed Investment Advisor Representative and life insurance agent.

He adds, "Insurance providers try to offer competitive riders in order to compete for business. So, make sure you get the bells and whistles you want."

4. Get quotes from multiple providers and shop around

Lastly, shop around! Every insurer has different policies, ratesand more.

"You can go with your first choice, but it never hurts to compare rates, riders, and reputations," says Sparrow. "This will help you choose the best option for you and your family," he adds.

A good place to start is by making a shortlist of reputable life insurance providers. From there, request life insurance quotes — you can often do so pretty easily online. Then, you can review the offerings side by side to see which is best.

Another option, according to Wadley, is to find an independent insurance agent that can look across the marketplace on your behalf to help ensure you have the right coverage at the right price from a reliable life insurance company.

You can easily get the process started online now by getting a free price quote from Haven Life. You can also use the table below to start comparing companies and policies.