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Key takeaways
A life insurance policy pays a sum of money to your beneficiaries if you die while the policy is active.
There are two main types of policies: term and permanent.
You may be able to buy a life insurance policy that goes into effect instantly.
When you're shopping for the best life insurance policy for you and your family, there are important decisions to make. We'll show you how to choose the right type of policy and coverage amount, get life insurance quotes and find the best company for you.
Table of contents
What is a life insurance policy?
How to buy a life insurance policy
Which life insurance policy is right for me?
How much life insurance should I buy?
How much do life insurance policies cost?
Compare top-rated life insurance companies
Find the best life insurance policy for you
Understanding life insurance quotes
What is a life insurance policy?
A life insurance policy is a contract between you and an insurance company. In exchange for regular payments, called premiums, the insurer pays out money after you die. This money goes to the people you choose as life insurance beneficiaries — usually children, a spouse or other family members.
Who needs life insurance?
A life insurance policy can be an important safety net if anyone depends on you financially. For example, if you’re the breadwinner, a parent, a homeowner or someone with co-signed debt, you may need life insurance coverage.
Beneficiaries can use the money for any purpose, such as repaying debts, replacing your income or covering your funeral and burial costs.
» MORE: 5 reasons to get life insurance
Key terms within this article
Beneficiary | The person(s) or entity that receives the death benefit when the insured person dies. |
Cash value | A component of a permanent life insurance policy that grows over time and allows you to make withdrawals, borrow against it and more. |
Death benefit | The amount of money the life insurance company pays a beneficiary after the insured person dies. |
Permanent life insurance | A type of life insurance that usually lasts a lifetime and includes a cash value component. |
Premium | The cost of maintaining a life insurance policy. |
Term life insurance | A life insurance policy that lasts for only a set number of years. |
How to buy a life insurance policy
When you’re in the market for a life insurance policy, these are your options:
Online. Depending on the type of policy you want, you may be able to apply for and buy a policy online and get coverage on the same day. This is known as instant life insurance. Many insurers and brokerages use algorithms to determine whether you qualify for a policy, and ask a series of questions about your health and lifestyle to set your rate.
Through an agent or broker. If you’re a high-risk applicant or you simply want someone to help you navigate the buying process, you can go through a life insurance agent or broker. Captive agents sell policies from one company, like State Farm, while independent agents typically offer policies from multiple companies.
Directly from the insurer. Most insurers allow you to buy a policy through their site, over the phone or in person. Before committing to a company, be sure to compare quotes to make sure you’re getting the best possible coverage at the lowest possible price.
Which life insurance policy is right for me?
In general, there are two main types of life insurance: term and permanent. Term life policies cover you for only a set period of time, such as 10 or 20 years. Permanent life insurance can last your entire life and typically includes a cash value component.
Term life insurance policies
Some types of term life are:
Level term life. This is the most common type of term life. The premiums and death benefit stay the same throughout the length of the term.
Annual renewable term life. This type of policy is for short-term coverage. It renews every year, and premiums typically increase with each renewal.
Instant term life. If you want to get coverage quickly, you can buy instant term life online. These policies don’t require a medical exam and you can get coverage the same day.
Decreasing term life. The death benefit decreases over the term of the policy while the premiums typically stay level. This type of policy is often used to cover a debt. Mortgage protection insurance is an example of decreasing term life.
Permanent life insurance policies
Types of permanent life insurance include:
Whole life. This is the most popular type of permanent coverage. Whole life offers level premiums, a guaranteed death benefit and guaranteed cash value growth.
Universal life. This type of coverage offers more flexibility than whole life, allowing you to adjust your premiums and death benefit as your needs change. The cash value growth is typically tied to market interest rates.
Indexed universal life. Similar to universal life, indexed universal life offers flexible coverage. Unlike universal life, the cash value growth is typically based on the performance of a stock or bond index.
Variable universal life. This policy offers the same flexible coverage as universal life, but differs in how the cash value can earn interest. Unlike universal life, you can typically choose from a range of investment options offered by the insurer.
Find the right life insurance plan for you
Make sure you and your loved ones are covered - compare customized life insurance quotes from our partners.
How much life insurance should I buy?
To figure out how much life insurance you need, think about your financial obligations now and in the future. Then, aim to take out a policy to match them.
For example:
Add up any long-term debts like a mortgage or college fees.
Multiply your annual income by the number of years you want your beneficiaries to be covered after you die.
Subtract any funds or assets you currently have that can be used to cover these expenses.
Need more help? Use our coverage calculator to estimate your coverage amount.
How much do life insurance policies cost?
In general, term life is cheaper than permanent life insurance. When comparing the different types of permanent coverage, whole life is typically more expensive than universal life.
It’s important to find a policy that you can afford. If you miss payments, the insurer may cancel your policy, leaving your beneficiaries without a payout.
Life insurance rates vary among insurers — sometimes significantly — so it’s a good idea to compare life insurance quotes from several companies before you buy.
» MORE: Cheap life insurance companies for 2024
Life insurance rates: Super preferred health class for women
Here are the average annual rates for applicants in the super preferred health class. In general, only non-smokers in optimum health can qualify for these rates. Roughly 4 in 10 of the more than 16,000 policies put in force in the last two years through Quotacy, a life insurance brokerage, were in the super preferred health class.
Issue age | Coverage amount | 20-year term life | Whole life | Universal life |
|---|---|---|---|---|
30 | $250,000 $500,000 $1,000,000 | $127 $183 $276 | $2,026 $4,015 $7,953 | $1,196 $2,358 $4,225 |
40 | $250,000 $500,000 $1,000,000 | $176 $281 $474 | $2,987 $5,937 $11,797 | $1,670 $3,307 $5,981 |
50 | $250,000 $500,000 $1,000,000 | $2,124 $4,247 $9,348 | $4,740 $9,443 $18,810 | $2,124 $4,247 $9,348 |
60 | $250,000 $500,000 $1,000,000 | $870 $1,656 $3,112 | $7,990 $15,943 $31,810 | $4,012 $7,991 $14,629 |
Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of November 9, 2023. | ||||
Life insurance rates: Standard health class for women
Here are the rates for applicants in the standard health class. This class is for non-smokers in average health. Roughly 1 in 6 policies put in force over the last two years through Quotacy were in the standard health class.
Issue age | Coverage amount | 20-year term life | Whole life | Universal life |
|---|---|---|---|---|
30 | $250,000 $500,000 $1,000,000 | $207 $337 $559 | $2,147 $4,257 $8,433 | $1,531 $3,026 $5,676 |
40 | $250,000 $500,000 $1,000,000 | $290 $502 $912 | $3,193 $6,348 $12,613 | $2,185 $4,337 $8,351 |
50 | $250,000 $500,000 $1,000,000 | $609 $1,140 $2,125 | $5,092 $10,147 $20,213 | $3,296 $6,558 $12,409 |
60 | $250,000 $500,000 $1,000,000 | $1,552 $3,025 $5,548 | $8,530 $17,022 $33,967 | $5,042 $10,051 $17,597 |
Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of November 9, 2023. | ||||
Life insurance rates: Super preferred health class for men
Here are the average annual rates for applicants in the super preferred health class. In general, only non-smokers in optimum health can qualify for these rates. Roughly 4 in 10 of the more than 16,000 policies put in force in the last two years through Quotacy, a life insurance brokerage, were in the super preferred health class.
Issue age | Coverage amount | 20-year term life | Whole life | Universal life |
|---|---|---|---|---|
30 | $250,000 $500,000 $1,000,000 | $144 $220 $349 | $2,344 $4,652 $9,190 | $1,472 $2,911 $5,273 |
40 | $250,000 $500,000 $1,000,000 | $202 $332 $571 | $3,533 $7,028 $13,887 | $1,960 $3,887 $7,262 |
50 | $250,000 $500,000 $1,000,000 | $448 $817 $1,519 | $5,600 $11,163 $22,133 | $2,860 $5,686 $10,518 |
60 | $250,000 $500,000 $1,000,000 | $1,261 $2,361 $4,465 | $9,594 $19,150 $38,093 | $4,651 $9,268 $16,996 |
Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of November 9, 2023. | ||||
Life insurance rates: Standard health class for men
Here are the rates for applicants in the standard health class. This class is for non-smokers in average health. Roughly 1 in 6 policies put in force over the last two years through Quotacy were in the standard health class.
Issue age | Coverage amount | 20-year term life | Whole life | Universal life |
|---|---|---|---|---|
30 | $250,000 $500,000 $1,000,000 | $242 $406 $688 | $2,536 $5,035 $9,993 | $1,575 $3,592 $6,679 |
40 | $250,000 $500,000 $1,000,000 | $360 $645 $1,165 | $3,864 $7,690 $15,197 | $2,551 $4,999 $9,458 |
50 | $250,000 $500,000 $1,000,000 | $794 $1,511 $2,874 | $6,128 $12,218 $24,230 | $3,787 $7,472 $13,934 |
60 | $250,000 $500,000 $1,000,000 | $2,151 $4,223 $8,268 | $10,574 $21,112 $41,997 | $5,979 $11,855 $21,946 |
Source: Quotacy. Lowest three rates for each age and risk class averaged. Data valid as of November 9, 2023. | ||||
Compare top-rated life insurance companies
Once you know the type of life insurance policy and amount of coverage you need, it’s time to find the best company. Check out some of the top insurers on our list by reading our life insurance reviews.
Insurer | NerdWallet rating | Policies offered |
MassMutual | 5.0 NerdWallet rating | Term, whole, universal and variable universal. |
Guardian | 5.0 NerdWallet rating | Term, whole, universal and variable universal. |
Northwestern Mutual | 5.0 NerdWallet rating | Term, whole, universal and variable universal. |
New York Life | 5.0 NerdWallet rating | Term, whole, universal and variable universal. |
Pacific Life | 5.0 NerdWallet rating | Term, universal, variable universal and indexed universal. |
State Farm | 5.0 NerdWallet rating | Term, whole and universal. |
AARP | 5.0 NerdWallet rating | Term, whole and guaranteed issue whole life. |
Why you can trust NerdWallet
Why you can trust NerdWallet: Our writers and editors follow strict editorial guidelines to ensure the content on our site is accurate and fair so you can make financial decisions with confidence and choose the products that work best for you. Here is a list of our partners, and here’s how we make money.
Find the best life insurance policy for you
Are you looking for the best life insurance policy for a specific need? Check out our roundups for:
Best term life insurance companies.
Best whole life insurance companies.
Best burial life insurance companies.
Best life insurance for seniors.
Best instant life insurance companies.
Best no-medical exam life insurance.
Best return-of-premium life insurance.
Best life insurance for children.
Best accidental death and dismemberment insurance.
Understanding life insurance quotes
A life insurance quote is an estimate; it gives you an idea of how much you’ll pay for the coverage. Quotes are typically based on a few details like the type of policy you’re shopping for, the amount of coverage you need and personal factors like your age and smoking habits.
How to compare life insurance quotes
It’s a good idea to compare life insurance quotes from multiple insurers before buying a policy. But when you do, make sure you compare the same features from each company. For example, select the same type of policy with the same coverage amount or term length, and give the same personal details for each quote. This will help you get a more accurate comparison.
Life insurance quotes vs. rates
A quote is an estimate of what you’ll pay based on minimal information. Rates are what you’ll actually pay for the coverage. When you apply for a policy, the insurer typically collects more detailed information about you to calculate your final rate, which may differ from the initial quote.
This final rate is your premium. Life insurance premiums are typically based on your life expectancy. To estimate your life expectancy, each life insurance company weighs factors like your health, family health history, lifestyle and driving record.
Did you know...
Two of the main factors that affect your life insurance premium are your age and health. So, the younger and healthier you are when you apply for coverage, the better your life insurance rate is likely to be.
» MORE: How life insurance works
Find the right life insurance plan for you
Make sure you and your loved ones are covered - compare customized life insurance quotes from our partners.
Life insurance ratings methodology
NerdWallet’s life insurance ratings are based on consumer experience, complaint index scores from the National Association of Insurance Commissioners for individual life insurance, and weighted averages of financial strength ratings, which indicate a company’s ability to pay future claims. Within the consumer experience category, we consider ease of communication and website transparency, which looks at the depth of policy details available online. To calculate each insurer’s rating, we adjusted the scores to a curved 5-point scale.
These ratings are a guide, but we encourage you to shop around and compare several insurance quotes to find the best rate for you. NerdWallet does not receive compensation for any reviews. Read our editorial guidelines.
Insurer complaints methodology
NerdWallet examined complaints received by state insurance regulators and reported to the National Association of Insurance Commissioners in 2020-2022. To assess how insurers compare with one another, the NAIC calculates a complaint index each year for each subsidiary, measuring its share of total complaints relative to its size, or share of total premiums in the industry. To evaluate a company’s complaint history, NerdWallet calculated a similar index for each insurer, weighted by market shares of each subsidiary, over the three-year period. NerdWallet conducts its data analysis and reaches conclusions independently and without the endorsem*nt of the NAIC. Ratios are determined separately for auto, home (including renters and condo) and life insurance.
Frequently asked questions
How much life insurance do I need?
The amount of life insurance you need is based on your current and future financial needs. When calculating your coverage amount, consider your current and future financial obligations, such as income, debts and daily expenses.
What is the average cost of life insurance?
The average life insurance rate is $26 a month, according to Quotacy. This rate is based on a $500,000, 20-year term life policy for a healthy 40-year-old. The average monthly life insurance rate for a $500,000 whole life policy is $540.
What are the main types of life insurance policies?
Term and permanent life insurance are the two main types of coverage. Term life is temporary and lasts only a set period of time. Permanent life insurance policies typically last your entire life and build cash value over time.
Do I need to take a medical exam?
Some life insurance policies require a medical exam. These exams help insurers get a better picture of your health, and subsequently, your life expectancy. The insurer uses the results to determine your eligibility for coverage and set your rate. If you want to skip the exam, consider no medical exam life insurance. However, because the insurer can't estimate your life expectancy as accurately, the rates for these types of policies can be higher.
How should I compare life insurance companies?
Financial strength and complaint data are important factors to consider when comparing life insurance companies.
Financial strength ratings are issued by agencies like AM Best. They typically indicate an insurer’s ability to pay out a future claim. For life insurance, NerdWallet typically recommends considering companies with ratings of A- or higher.
Complaint ratios from the National Association of Insurance Commissioners can give you a better picture of a company’s customer experience. NerdWallet's life insurance ratings methodology favors companies that have fewer complaints to state regulators.
