A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Car Insurance Agent Daniel Walker

UPDATED: Nov 3, 2021

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The price of life insurance depends on a myriad of factors, which vary based on each individual’s unique situation. Even with the same individual, insurance premium quotes will vary over time, based on the person’s age, health, occupation and policy variables such as payment frequency. Life insurance, regardless of the price, is an effective and necessary tool to protect families from financial ruin if the breadwinner should die. Affordable, quality life insurance is available, and serves as an important part of every family’s financial plan.

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Life Insurance Affordability

The word affordable is relative when discussing life insurance. This depends on a family’s monthly income and obligations, as well as how much money the remaining family would need to survive if there were no breadwinner. One of the reasons people become concerned with the cost of life insurance, is that certain types of policies never return the money invested, as long as the policyholder is alive. Of course, the trade-off is peace of mind that the family will be taken care of in case of an accident. To estimate how much it would take to support the family’s current lifestyle, an estimate can be assembled as follows.

Estimating Life Insurance Needs

Start by adding up current expenses such as mortgage debt, car payments, utilities, food and any educational and other expenses for children. Also, add in costs for health insurance, if a remaining spouse would not be able to get this through work. Next, factor in childcare if the remaining spouse will need to work full time; funeral expenses, estate taxes and probate costs. Then consider future expenses such as college, weddings and money to pay off any debts such as credit card bills or other outstanding loans. Finally, estimate how much a spouse would need to live on in retirement years, adding in periodic costs such as home repairs and maintenance. Add these costs up, then subtract any current savings in retirement accounts, to get an estimate of how much money a life insurance policy would need to pay out to the surviving family members, to avoid leaving them in financial ruin if the breadwinner dies.

Another important factor to consider when estimating life insurance needs is any hobby the insured might participate in that adds additional risk to his life. For example, piloting a plane, scuba diving, skydiving and mountain climbing are all hobbies that will place people in a higher risk group, with correspondingly higher premiums.

The affordable life insurance question is also challenging to answer simply, because people can afford different things at different parts of their lives, depending on whether there are children in the home or other large expenses, or whether either spouse has medical conditions or is close to retirement. The younger a person buys life insurance the better; premiums will be lowest and most affordable before a couple has children, a large home or any signs of declining health.

Quality Life Insurance

There are many life insurance companies for consumers to choose from, although it is important to investigate each company in terms of its financial stability. Consider paying into an insurance policy for 30 years, only to find out that the insurance company does not have the resources to pay out on the policy anymore. Several rating agencies track the financial performance of insurance companies, such as Standard & Poor’s, Moody’s and A.M. Best. Insurance companies have a grade assigned to them based on their financial condition, and a wise consumer would probably want to go with an insurance company that is rated “A-” or better. Some insurance companies show their ratings on their websites, and each of the rating agencies have publications available in public libraries, which are also accessible on the Internet.

Least Expensive Life Insurance

Term life insurance is the type of policy with the lowest payments possible. It is available in policy periods of 10, 20 and 30 years and is designed to cover policyholders long enough for them to get past some of the large expenses in their lifetime, such as putting children through college or paying off a mortgage. In general, the younger people buy life insurance, the better off they are and with term insurance, a policy can be held while the family is young and has a mortgage or other obligations to pay. As the family grows and obligations are paid off, the family will have resources to save and invest so they can self-insure once the term insurance expires. The downside with term life insurance is that it becomes very expensive in the later years. This is especially problematic for individuals who may have health conditions, or any retired person who is not able or willing to work and bring in more income to pay the premiums on term insurance. Some term insurance policies allow for conversion to a whole life policy over time. This may be a smart strategy for some, enabling them to start with the lower payments on term insurance, and convert certain amounts of coverage over time into a whole life policy as their income grows.

Whole Life Insurance

Whole life insurance tends to be quite a bit more expensive in the beginning than term insurance. This type of life insurance is designed to cover a policyholder for their entire life, hence the name. One of the benefits of whole life insurance is the premiums that remain stable for the entire life of the insured. Additionally, whole life insurance builds up cash value and receives dividends, which, over time, can be used to pay the monthly premiums or increase the face value of the policy. A substantial part of the cash value is also available as a loan any time after the first two or three years of the policy’s life. Although whole life insurance is more expensive in the beginning, as an individual gets older, the premiums are less than they would be for term insurance. As with any life insurance, whole life insurance policies are best to buy when individuals are young and healthy.

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