How to Find the Best Term Life Insurance

Best Term Life Insurance - Dead End

The best term life insurance is the kind you’ve purchased *before* you die.

If you don’t have life insurance, the best life insurance you can get is any life insurance.

Not that all insurance is good.

But in the case of life insurance I feel like people sit around and do nothing because they are confused by all of the choices or because it just takes so long.

The perfect really is the enemy of the good here.

According to LIMRA, “Three in ten American households (35 million) are uninsured and half say they need more life insurance.”

Truthfully, you do need to get the right kind of life insurance. But it isn’t that hard. For most people they will need a simple term life insurance policy, which costs much less than your iPhone bill every month.

Other types of life insurance have their positives, but they come with high expense or an investing piece that confuses the product. For most people life insurance should be nothing more than a replacement of income for their dependents when they die.

Today I’m going to tell you how to find the best term life insurance.

First, I’ll tell you what I have. Then I’ll quickly explain how I found it. Then you will be able to find the best term life insurance for you.

I’m 36. I’m married with two little kids (3 and 1). My wife doesn’t work but could if she needed to. In 2009 I purchased a $500,000, 20 year term life insurance policy from ING’s Reliastar.

Essentially, if I die in the next 20 years (now 17 years) my wife will get $500,000 to use to support her and the kids. If I don’t die during this 20 years, the policy is useless. I pay around $45 a month for this policy and the security of knowing that if I were to croak, my family would have a safety net.

Life insurance is important for my family to have because I want my kids to be raised by their Mom and not a daycare. I want my wife and kids to be able to stay in this house if they want to. I also want my wife to not have to work for every dollar that she has to support the kids.

We had our children because we thought I’d always be around to help support my family. If I’m gone, I want there to be some financial support in my place.

I picked ING’s Reliastar as our life insurance provider because they have a solid rating from A.M. Best, Moody’s, S&P, and Fitch, who all rate the best term life insurance companies. If you are looking for the best term life insurance company I would encourage you to check the ratings with these agencies.

I also chose ING’s Reliastar because of the rate that they quoted me. I went direct to their site to get the quote, but you can find the best term life insurance rates by getting a quote from a multi-company site like Insureme.com.

Don’t stop there though. Check with your employer, current auto or home insurance provider, trade organizations, etc. Scour the globe and get quotes to truly find the best term life insurance rates.

After you’ve looked at quotes and ratings of companies for yourself, you may start to wonder about term and amount. Is 20 year, $500K right for you? Not necessarily.

The best life insurance term for you is primarily going to depend on your kids ages. Typically someone with a newborn (and more kids on the way) goes for a 25 to 30 year policy.

As for best life insurance amount, just make sure it’s enough to cover your funeral, pay off all your debts, and replace your income. If you’re a stay at home parent you may want to consider getting insurance to replace the value of you being home (i.e. a full-time nanny or at least daycare).

So that’s my take on finding the best term life insurance. It’s really not that hard or expensive. Do it today!

Thanks to Jeff Rose, who started the Life Insurance Movement which inspired this post. Check out the movement for more information on life insurance and to enter the giveaways.

Image by bennylin0724

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Last Edited: August 23, 2012 @ 3:24 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

12 comments
Veronica @ Pelican on Money
Veronica @ Pelican on Money

Is there a specific formula that acts as a good rule of thumbs, say.. age x some amount = $ how much life insurance a person needs? 

Philip Taylor
Philip Taylor moderator

7 times annual income is the rule of thumb I've heard. Obviously you'd want to move that up or down based on your debt, number of earners in the house, and whether you want to pay for your kid's college. Don't get too hung up on a number though. A simple $50,000 policy is better than nothing. Just get some insurance. When your situation changes or if you change your thinking, simply change the policy to reflect  that.

Adaptu
Adaptu

According to LIMRA, “Three in ten American households (35 million) are uninsured and half say they need more life insurance.”

 

YIKES!

noelm
noelm

Perfect explanation. I have a question though, why did you go for 20 years and not 30. DS just turned 4 and I am discussing quote with various companies, 2 stock and 2 mutual insurance companies. I am asking for 30 years, so that by the time policy expires, DS will be 34, should be well settled by then. If anything happens before that and he is still not settled, my money should give him a headstart. Once I get final numbers, I am going to ask them premium for 20 years too, just to check the difference.

Philip Taylor
Philip Taylor moderator

 @noelm So glad to hear you are getting life insurance. Great question. In 20 years I plan to be independently wealthy, have a paid off house, and not need insurance. Actually, I'm hoping to be able to "kill" this policy well before the 20 years is up. Although, in 10 years $45 a month will be really cheap for life insurance. I'll probably hold on to it just to pay for burial costs if I croak. In addition to the self-insurance thing, in 20 years my kids will all be at least 15 (in high school and able to have part-time jobs), and my wife will have time during the day to work in a career she loves. So, replacing my income won't be necessary. It would just be a luxury at that point.

AverageJoeMoney
AverageJoeMoney

I've read lots about why to buy and what to buy, but you're the first, PT, to mention the company rating. This is a huge part of buying insurance. You want it there when you need it!

Mike Dunham
Mike Dunham like.author.displayName 1 Like

One thing to keep in mind, particularly if you are looking at coverage for a longer term, is to consider the possibility of buying multiple policies of varying lengths. It often works out cheaper and gives you more flexibility. For instance, I have two little kids and a mortgage, so I went looking for a 30-year policy that would pay $750k. However, I expect the mortgage (around $250k) to go away in 10-12 years, and my kids will be grown and out of college in around 20 years. So instead of buying the one policy, I bought three (10-year, 20-year, and 30-year) for $300k each. We will have the mortgage paid off when the first one expires and the kids out of college when the second one expires. For now I actually have more coverage than I was originally wanting, but because of the shorter terms my overall cost is lower. In addition, if I ever decide to cancel one policy for some reason, I don't have to lose *all* of my coverage.

Mike Dunham
Mike Dunham

Yes, the insurance companies allow multiple policies, or at least Liberty Mutual does. And my agent loved it - six commissions instead of just two. :)