How to Choose Life Insurance that is Cheap and Easy to Buy

May 4, 2023

Buying life insurance can be really confusing. That is thanks in large part to insurance salespeople that have a vested interest in selling you a product that puts money in their pockets at your expense. So most folks put it off altogether. 

Also, the more complex a life insurance product gets, the more it costs. So most of us need some help when it comes to choosing the right life insurance policy that fits our needs and doesn’t cost an arm and a leg.

That’s why this article is here. We’ll first talk about why people need life insurance in the first place. Then we’ll go over some tips for choosing simple and cheap life insurance policies, as well as address some common questions (and misconceptions) most people have about life insurance.

What’s the Point of Life Insurance?

The specific point of having life insurance is to provide income replacement for your loved ones in case you pass away early.

For example, you might have a spouse or children (or even an aging relative) that depends on your income to live. If you were to die unexpectedly, their means for paying everyday expenses would be cut off, sending them into a financial crisis. But having a life insurance policy protects them financially. If you were to die, the policy would provide a large death benefit to ensure they can continue paying expenses without your income.

Term Life Insurance Is Best

“Term life insurance” is by far the best choice for most folks. These are the simplest, cheapest policies that cover your family for a specific ‘term’. (A term just means the length of the policy, like 20 or 30 years.)

Remember, the primary reason for life insurance is replacing your income whilst your loved ones depend on it. As you continue to build wealth and your family depends less on your income, life insurance becomes less necessary. That’s why term life insurance is best. Because eventually the need for insurance will phase out (and there’s no sense in paying for a policy when you don’t need it later in life!)

Other life insurance products you might hear about are almost always a bad choice. Policies like universal life insurance and whole life insurance attempt to combine elements of saving and investing into your life insurance policy. 

What’s wrong with that? Well, investing inside of an insurance policy is one of the most costly ways to invest. There are more commissions and potential surrender charges hidden in these policies. Overall, these costs associated with investing are one of the main predictors of how much money you’ll have when you eventually retire.

Not only will it cost you more LATER when you retire, but life insurance policies that combine investment products and insurance cost you a whole lot more NOW as well. They handicap your ability to build wealth while young, and many folks end up ditching their policies only a few years after signing up.

Long story short, term life insurance will cover you sufficiently (and cost the least). Anyone selling complex insurance products usually is putting their own financial interest over yours.

So how Much Term Life Insurance do I Need?

A smart rule of thumb is to get a term life insurance policy equivalent to roughly ten times your annual income. That number can be misleading though. The more personal wealth you have built and the further along you are in your financial independence journey, the less coverage you’ll actually need.

That’s called being self-insured. So while that 10x income number can be a helpful guide, you might find that you don’t need quite that much coverage based on your family’s specific circumstances.

If you are looking for more information about the exact amount of coverage you should be choosing, check out this calculator.

How Much Will Term Life Insurance Cost Me?

On average, a term policy will cost you a bit more than your Netflix subscription each month. The average cost of a term life insurance policy is only about $200 a year. If you are in your 20’s it will likely be even cheaper than that. So that excuse that term life insurance is too expensive doesn’t hold any water! Your specific premium cost will, of course, depend on your age and overall health condition.

Typically, the older you get the more you will pay for your policy. If you smoke you’ll pay a whole lot more. So don’t smoke! But a healthy 35-year-old male that doesn’t smoke will likely pay between $20 and $30 a month for a $500,000 20-year term policy. What if you are 45 years old? You’ll probably pay between $40 and $50 a month for the same policy.

By nabbing a term life insurance policy instead of one of those more expensive life insurance options, you’ll be getting an incredibly low fixed monthly cost. That way you’ll be able to allocate the extra money you’ll be saving towards your retirement accounts. Another big-time adult choice. Woo hoo!

Isn’t My Work Life Insurance Policy Enough?

If you have access to some amount of life insurance through your employer, that is great! But it’s also not enough. Your employer will typically have a life insurance policy that covers roughly the equivalent of your annual salary. And as we stated above, you need a policy that provides roughly ten times your annual income in order to provide for your family.

You also need your life insurance policy to be portable. If you quit or get let go from your job, that work policy won’t go with you. So just consider that employer-provided policy to be a little icing on the cake on top of the one that you get yourself.

Does a Non-Working Spouse Need a Life Insurance Policy too?

Short answer – yes. I know that we said that the reason for buying life insurance is income replacement. But a non-working spouse provides a whole lot of household help that would cost you a lot of money should they sadly pass away early. 

Insuring the life of that spouse is crucial to ensure that the months and years that would follow such a tragic event aren’t complicated by major financial burdens of childcare and home help that you otherwise wouldn’t be able to afford. A life insurance policy for a non-working spouse provides added peace of mind and the necessary financial help you’ll likely need.

How Long of a Term Should I Choose? 

Many folks think that it’s best to have coverage for their entire life. Why not, right!? Well for one, it’s a heck of a lot more expensive, of course. In fact, whole life insurance typically costs 6 to 10 times more than a simple level term policy!

Term coverage makes the most sense, because as we discussed earlier, you’ll only need insurance while you are working and loved ones depend on your income.

So, how long of a term should you be getting?

Choose a term that will get you to the point in life where your dependents are self-sustaining and when you will also have a more robust overall financial picture. Your goal should be to reach financial independence over the years that your term insurance policy is in place. 

For most folks, a 20 or 30-year policy will make the most sense. If you have young kids, a 20-year policy will ensure that you have proper coverage during the years they are in your home. If you just took out a 30-year mortgage you’ll likely want to get coverage that lasts for the entire length of your house payments.

You should also base your choice on what you can afford. If you are more likely to continue to pay the premiums by going with a less expensive policy that will adequately cover you for 20 years then go for it. Don’t let ‘perfect’ be the enemy of ‘good enough.’

Policy lengths of 20 and 30 year are typically the sweet spot for highest coverage amount with the lowest possible premiums. Interestingly enough, going with a 25-year policy will often cost you more than a 30-year policy. Crazy, right!? 

Best Places to Shop for Term Life Insurance

The internet has, of course, made buying almost everything much easier thanks to price transparency. Life insurance is no exception.

Shopping around online is your best bet for both the level of ease and in order to score the least expensive premium cost. The two places that I have purchased life insurance policies for my wife and me are Costco and Policygenius. There are other solid options but these are my two favorites.

How to buy cheap life insurance

The warehouse club Costco Wholesale offers life insurance policies to its members. If you are an Executive member you’ll get the best deal. Costco has partnered exclusively with Protective to offer discounted policies to its members. This means no shopping rates with other providers but they’ve done a good job of creating solid value for members.

Whether you are a Costco member or not, you should still do some shopping at Policygenius. They have been at the forefront of selling insurance policies online as they’ve been around since 2014. You can compare policies from more than a dozen different insurance companies. That isn’t the case on many of the other life insurance websites.

Policygenius also offers loads of helpful articles on their site and allows you to compare quotes for other important insurance needs like the often-overlooked disability insurance.

Don’t Snooze on a Life Insurance Policy

I’m all about simplicity. The easiest option isn’t always the best option. But in this case, it is. Quickly signing up for a term life insurance policy and getting on with your life makes a whole lot of sense. You can always choose to get additional coverage down the road. Don’t put off such an important task much longer. Every year you wait means an increase in the premiums that you’ll pay.

And, of course, we never know when our time on earth is up. Forgoing the purchase of life insurance puts our loved ones at risk. And since the internet has made life insurance shopping so easy and inexpensive, there’s just no good reason not to.

The Bottom Line:

Most folks think that it is difficult to purchase a life insurance policy and that it’s expensive. Neither is true. Buying life insurance is cheap and easy!

Just remember the primary reason for having a life insurance policy – income replacement for loved ones that depend on you. And ignore all the other fancy bells and whistles with insurance + investment products. They are extremely costly and hurt more than they help.

Our favorite site to shop for an inexpensive term policy is Policygenius. They compare quotes from various insurance companies and present you with the cheapest options for you.

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One comment on “How to Choose Life Insurance that is Cheap and Easy to Buy

  1. Olivia Smart Mar 14, 2022

    Thank you for your advice to choose a policy that will last as long as it takes for your children or dependents to be self-sustaining. We’re thinking about getting life insurance policies since we want to be prepared for anything. We’ll be sure to figure out how long that might be for our own children so that we can determine the length of our policy.