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

October 14, 2021

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.

More than 100 million Americans don’t have any type of life insurance. That’s not good! And one of the major roadblocks to getting the coverage they need is a lack of knowledge. Most people don’t know what type of life insurance to choose, where to shop for coverage, or how much coverage they actually need. 

That’s why this article is here. We’ll address some of the main questions that people have about shopping for life insurance and give you some answers to those questions that might otherwise paralyze you from getting this incredibly important task done. 

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

Here’s the short answer. Buying life insurance is cheap and easy these days! Our favorite site to shop for an inexpensive term policy is Policygenius.

Now for the long answer…

What’s the Point of Term Life Insurance?

Let’s start by discussing the point of having life insurance. In all likelihood, if you are reading this article, you have a need for life insurance. If you have loved ones that depend on you, having life insurance is crucial. You might have a spouse or children or even an aging relative that depends on your income. The specific point of having life insurance is to provide income replacement for your loved ones in case you pass away early. And term life insurance is by far the best choice for most folks.

The fact that life insurance is meant to replace your income is the crux of why term life insurance is the best choice for almost everyone. 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. 

…life insurance provides income replacement for your loved ones in case you pass away early.

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

Life insurance policies that combine investment products and insurance cost you a whole lot more, too. 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. And consumers are more likely to dump their policy altogether because of burdensome monthly premium costs. No coverage = no bueno.

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 passive income covers your monthly spending obligations or 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 $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 decide to purchase a whole life insurance policy thinking 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! So term coverage makes the most sense. But how long of a term should you be getting?

Choose a term that will get you to the point in life where your dependants 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. 

…most folks will want to consider a 20 or 30-year term
life insurance policy.

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. Choosing your life insurance policy by 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.

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.

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