No one wants to spend hours shopping for something that offers a benefit only after you die. But when it comes to purchasing life insurance, you should.
When the Consumers’ Checkbook researchers collected the prices, they found huge company-to-company differences for identical term life insurance policies sold by major vendors.
Two Checkbook employees, a 48-year-old man and a 40-year-old woman, collected quotes from independent agents, major insurers and online comparison sites for $ 500,000 term life insurance policies for 10, 15 and 20 years.
Both benefit from the best corporate rates (excellent general health, no smoking, low risk family medical history, etc.).
The 48-year-old would pay $ 709 a year for the cheapest policy LifeQuotes.com offered for a 20-year plan, compared to $ 1,896 a year with Allstate. Over 20 years, the premiums of these companies would amount to $ 14,180 and $ 37,920 respectively, a difference of $ 23,740.
The young woman would pay less for the blanket, but still benefit greatly from the shopping. The cheapest 20-year plan for her was also offered by LifeQuotes.com for $ 288 per year (an independent agent offered the same coverage for $ 290 per year).
Its highest price came from an agent who sells policies for Erie, for $ 780 per year. Over 20 years, these cost differences add up to total payments of $ 5,760 versus $ 15,600, a difference of $ 9,840.
Websites like LifeQuotes.com will help you shop quickly; they work with insurers to report and sell their policies. Checkbook also checked rates using AccuQuote.com, eFinancial.com and SelectQuote.com.
Among them, LifeQuotes stood out because it offered consistently low prices and seemed to work with more insurance companies than the rest, all of which were highly rated for financial security. Unlike the others, LifeQuotes didn’t ask Checkbook researchers to provide contact information before revealing their best rates (and no sales calls or emails).
It is also worth asking for proposals from a few local independent agents. Checkbook buyers have found that they generally offer competitive prices and great information on which companies waive medical review requirements and which ones facilitate approval.
Price comparison websites and independent agents will not provide you with rates from some major insurers, such as State Farm and USAA, which sell coverage through their own agents. If you can save 10 minutes, collect the rates on the websites of these companies, as well as on Mass Mutual and Nationwide, not offered by the four online brokerages we have verified.
Before shopping for yourself, decide on the type and amount of coverage you want. There are two main types: term life insurance and permanent life insurance; the latter, in its various forms, is also known as life insurance, whole life insurance and universal life insurance.
With a term life plan, when you sign up you decide how long you want the coverage and how much the policy will pay out if you die within that time. If you buy a plan for $ 250,000 over 20 years and die within those 20 years, your heirs get $ 250,000; if you are still alive after 20 years, the company keeps any premiums you have paid and there is no payment.
Permanent life insurance policies do not expire after a set period. You agree to pay premiums, often for the rest of your life, and the insurance company agrees to pay your heirs the death benefit on each death. With most plans, you can surrender your policy during your lifetime and receive a calculated cash value that accumulates based on how much you’ve paid and for how long.
The problem with these plans is that they cost a lot more than they ultimately cost. For example, the 48-year-old Checkbook buyer can buy a 20-year, $ 500,000 term life insurance policy for about $ 700 per year, but would pay $ 5,000 per year for a 20-year term life insurance policy. permanent life insurance of similar value with a similar death benefit.
Permanent life plans that contain cash value options are structured more like investments than insurance policies, but they offer negative rates of return if cashed out within 10 or 15 years.
When deciding how much coverage to buy, think about how much money it would take to replace your income and prevent your family from suffering hardship due to debts, the loss of any employer-sponsored health insurance. and / or increased childcare costs. Some people also add enough to cover mortgage payments and college enrollment for their children.
Consider other help your family might get if you die, including employer-provided life insurance benefits and Social Security survivor benefits.
Because for obvious reasons your age is a major factor in how much you’ll pay for life insurance, lock in lower rates by buying younger than older.
Favor the purchase of a longer term policy. You just can’t completely predict what your life will be like in more than 20 years: you could get married, have children, divorce, or lose your job. If 15 years after starting a 20-year policy, you feel like it’s a waste, you can cancel it.
Twin Cities Consumers’ Checkbook magazine and Checkbook.org is a non-profit organization whose mission is to help consumers get the best service and the lowest prices. It is supported by consumers and does not take any money from the service providers it reviews. Until January 3, Star Tribune readers can access Checkbook’s full life insurance report, as well as all Service Provider Checkbook Ratings and Consumer Advice through Checkbook.org/StarTribune/Life-Insurance.