Shopping for life insurance works much like shopping for a new couch: you would not buy the first one you see. The last thing you want to do is click on the first policy you come across and sign the contract — not for something as important as safeguarding your loved ones' financial future. That is why you will want to shop around and compare life insurance quotes before making a final decision.

What is a life insurance quote?

A life insurance quote is an estimate of the amount you will pay on a monthly or annual basis for a specific life insurance policy. These quotes are not set in stone, but they will give you a personalized preview of a policy's cost based on several factors, including the amount of coverage you want, your age, and your overall health and lifestyle. Once you formally apply, the insurer verifies those details through a process called underwriting, and the final premium you are offered can differ from the initial estimate.

Why is it important to compare life insurance quotes?

The price of life insurance premiums for the same amount of coverage can sometimes vary significantly from company to company, so it makes sense to get quotes from several insurers before buying a policy.

At the end of the day, you want to make sure you are getting the coverage you need at the best possible price — and the only way to do that is to shop around and compare quotes. Comparing life insurance quotes and finding a lower rate could save you hundreds or even thousands of dollars over many years, so the effort is worth it.

How to gather accurate life insurance quotes and compare them, step by step

Step 1: Decide what type of life insurance coverage you want

The first thing you need to do is decide what type of life insurance you need. You have two main choices: term life vs. whole life.

Term life insurance is straightforward, simple, and generally the cheapest form of life insurance out there. It is pure life insurance that provides a death benefit for a set amount of time.

Whole life insurance, sometimes called permanent life insurance, is designed to provide coverage for your entire life. In addition to the death benefit, whole life policies come with a cash value component, which makes them more expensive than term life.

Comparing term life policies is pretty straightforward — you are simply comparing prices based on two variables: term length and amount of coverage. Comparing whole life insurance policies is a little trickier, since there are more variables to consider, including the cash value, additional fees, and any insurance riders you might want to add to the policy.

Step 2: Figure out how much life insurance you need

Deciding how much life insurance you need is crucial to getting an accurate quote. The more coverage you need, the more expensive your policy will be.

Figuring out how much life insurance to apply for usually depends on several factors, including your income, your family situation, and what financial obligations — mortgages, college savings, income replacement, funeral costs, to name a few — you need the death benefit to cover, and for how long.

Step 3: Shop around for coverage

Once you have figured out what type of life insurance policy you are looking for and the amount of coverage you will need, you are ready to shop around in one of two ways:

• Shop online yourself: You could search online and go directly to the insurers for quotes yourself, requesting quotes from several different life insurance companies and then comparing them on your own.
• Shop with an insurance agent or broker: You can work with an agent or broker who will shop around for you, present you with the best options to choose from, and help you apply for coverage.

One distinction worth knowing: some agents are captive agents who represent a single insurer, while independent agents and brokers can sell policies from multiple companies, which affects the range of quotes you end up seeing.

Either way, you will want to make sure you do your research on the insurance companies you are considering. Check online reviews and consider their financial strength, complaint rates, and customer service ratings before making a final decision. Financial strength ratings, published by independent agencies such as AM Best, S&P Global Ratings, and Moody's, indicate an insurer's ability to pay claims decades from now, and state insurance departments track complaint data that you can review before committing.

Step 4: Choose your policy

Once you have decided on a policy with a specific insurance company, you are ready to apply for coverage. At this point, you will gather your personal information and fill out the application.

Keep in mind that some companies may also require you to take a medical exam — which usually includes a blood pressure test, blood sample, and urine sample — before finalizing your policy. Doing so could potentially lower your rate, but many insurers offer no-exam policies that allow you to bypass the physical altogether if that is what you prefer. However, these no-exam policies usually cost slightly more, because the insurer takes on higher risk without full medical underwriting.

Once a policy is issued, most U.S. states also require insurers to provide a free-look period — commonly 10 to 30 days — during which you can cancel the policy for a full refund if you change your mind.

What factors go into your life insurance quote?

Life insurance companies take a wide range of factors into consideration when coming up with a quote for your policy. Those factors include:

• Age: The younger you are, the less expensive your insurance policy will be — and your quotes will generally reflect that.
• Overall health: Your current state of health and your personal medical history could impact your quote. Smokers are usually more expensive to insure, which leads to higher costs.
• Lifestyle and occupation: If you work a dangerous job (think construction worker, firefighter, or truck driver) or regularly enjoy hazardous hobbies like skydiving or bungee jumping, those will often drive up the price of your coverage.
• Policy type and coverage amount: Whole life policies usually cost more than term life policies, and the more coverage you need, the higher your quote will be.
• Gender: Women are generally less expensive to insure because they have longer life expectancies than men.
• Family medical history: Insurers will ask about your immediate family to check for serious or hereditary conditions like heart disease, cancer, diabetes, and Alzheimer's disease, which could increase your risk level to insure.

What is the average cost of life insurance?

The average cost of a life insurance policy depends on all of the variables above. Depending on who you are and what you are looking for, your policy's monthly premiums could be anywhere from $22 to $1,800.

For example, a life insurance policy with a $500,000 death benefit could cost anywhere from $22 per month for a 22-year-old female looking at a 20-year term policy to $1,800 per month for a 60-year-old male who wants a whole life policy.

Monthly life insurance premiums by age and gender ($500,000 coverage)

Source: Policygenius average monthly premium data for people with few health conditions and who don't smoke. Term life rates reflect a level 20-year term.

Life insurance quotes FAQs

Is getting a life insurance quote free?

Yes. Insurance companies almost always provide life insurance quotes for free, and most insurance brokers and agents will never charge you just to find out how much a policy might cost.

Why do life insurance quotes vary so much between companies?

Quotes might seem very different from one company to the next because each insurer uses its own formula to determine how much of a risk you are to insure. They often take into account a similar wide range of factors — like your age, gender, health, lifestyle, and medical history — but one company might weigh certain details more heavily than others, which can result in different price points for the same coverage.

Do I need a medical exam to get a quote?

In most cases, you will not need a medical exam to get an initial life insurance quote. To get your quote, you will be asked to provide some basic details — your age, gender, height, weight, and where you live — along with some additional questions about your health history and coverage choices.

However, some insurers might require you to take a medical exam after you apply if you want to qualify for a lower rate. That exam usually includes a blood pressure test, blood sample, and urine sample. Many insurers also offer no-exam policies that allow you to skip taking a physical entirely.

Is the cheapest life insurance quote always the best option?

Not necessarily. Getting the cheapest life insurance might mean getting less coverage than you need, dealing with hidden rules, or getting coverage from a company with weak financial strength or poor customer service. You will want to take all of these factors into account, along with the overall price, before making your final decision.

Source: Yahoo Finance