Life insurance: Compare rates to save time and money

Life insurance isn’t something you necessarily look forward to shopping for, but taking the time to look around and compare rates will save you a significant amount of time and money in the long run.

The right life insurance plan gives you and your family peace of mind knowing they’ll be financially secure when you pass away.

Life insurance is especially important if other people in your life financially depend on you, you have outstanding debt that won’t be paid off by the time you die, or you want to leave a nice nest egg behind to your beneficiaries for their future expenses like college tuition or a new home.

A life insurance policyholder pays a monthly or annual premium in exchange for a payout, called a death benefit, to their beneficiaries upon his or her death. The rate you pay will likely be a major deciding factor in which life insurance policy you choose because it will directly affect your household budget.

Term life insurance vs. Whole life insurance: Which option has cheaper rates?

Broadly speaking, there are two types of life insurance plans: Term life and whole life.

Term life insurance policies tend to offer lower monthly premiums, however you will only have coverage for a set period of time depending on the length (or term) of your policy. Term policies usually have options for 10, 20, or 30 years of coverage. If your term policy expires before you pass away, you’ll have to sign up for another policy if you want your loved ones to receive benefits upon your death.

Remember that purchasing a life insurance plan when you’re older will be more expensive, or you’ll have to settle for a plan that offers less coverage to keep the same low rate.

Whole life insurance policies have higher rates compared to term life insurance policies, but you’ll have lifelong coverage. So, although the premiums are higher, whole life insurance offers predictable rates and stable coverage as you get older.

Whole policies also allow you to grow your wealth over time by offering different investment options for the cash value of your policy.

Here’s what affects life insurance rates

Insurance companies typically set policy rates by calculating your life expectancy. This means they’ll look at several factors to calculate the rate you’ll pay, including:

Age: Younger people tend to pay less for life insurance per month

Tobacco use: Smokers usually pay more for life insurance due to health risks associated with smoking

Gender: Females pay less for life insurance because they live longer, on average

Policy size: Policies that offer more coverage tend to be more expensive

Policy length: Longer term policies may be less expensive per month that shorter term policies

Each insurance company weighs these factors a little differently. You may qualify for a plan with great coverage for an affordable price from Company A, and a plan with minimal coverage for small fortune from Company B.