For something as important as life insurance, it’s essential you get both the right kind and the right amount of coverage. Wondering how to buy life insurance the smart way? It’s all about working with someone you trust.

Do You Need Life Insurance?

For most people, life insurance is a crucial, must-have kind of coverage for real financial peace. In exchange for your policy payments (also called premiums), your life insurance provider will pay a death benefit to your family when you die. And yes, we know that’s a heavy word.

But don’t let some far-off future event keep you from seeing the value of getting life insurance today. If you have a spouse, dependent child or anyone who relies on your income for living expenses, coverage is a must.

Buying life insurance is on the same list as getting a will or opening retirement accounts—it’s stuff everyone needs, but few enjoy thinking about. While getting the right life insurance in place can feel hard, a little effort here pays off big-time in the form of peace of mind for you and your family.

Life Insurance Calculator 

You can get an idea of how much you need (and save some brain calories while you’re at it) by using this quick life insurance calculator. 

Which Type of Life Insurance Should You Buy?

When you’re ready to shop for life insurance, there’s only kind worth considering: term life insurance. Let’s see why.

Get Term Life Insurance

The name “term life” means it’s a policy that gets you death-benefit coverage for a set amount of time. Often, it’s for 10, 15 or 20 years. But it can be longer (it all depends on your age, your dependents’ ages, and where you are in your financial journey). If you die during the term, the insurance company will pay your beneficiaries (fancy talk for the ones you love) whatever amount you’ve settled on in your insurance agreement.

Because term life insurance has only one purpose—to pay out a death benefit when you die—buying this kind of policy is way more affordable than a permanent plan. And that’s not surprising when you realize most of the features of permanent plans are there to pump up your premiums. That’s why term life is always the better option to protect your family without overpaying.

Avoid Permanent Life Insurance

As the name implies, permanent life insurance is coverage that lasts throughout your lifetime. There are three main kinds of permanent life insurance, each one a slightly different form—whole life, universal life and variable life insurance.

We know the word permanent might sound reassuring, but it’s not an advantage in this context because the need for life insurance doesn’t last forever. That’s why term coverage is the best solution—because it allows you to decide how much (and for how long) you want coverage, while only paying premiums for a set term.

As you move toward financial independence, you’ll have fewer people depending on you for living expenses and less need for a life insurance policy. The goal is to become self-insured over time through a mix of emergency savings and retirement accounts.

Permanent life insurance tries to do too many things at once. It takes two legitimate needs—the need for life insurance and the need for an investment plan—and mashes them up into a hot mess. Those who sell this kind of policy will offer you a chance to build up savings in the plan, called cash value. The money in that account is built up as the company takes part of your sky-high premiums and invests those funds.

But it’s a terrible plan: Not only are the premiums far higher because of the investment piece, but there are also better places to invest that’ll help you get way higher returns on your money.

Permanent insurance policies are a huge rip-off. They’re the last thing you should be buying if you’re trying to protect your financial future and build wealth. Stick with term life insurance, which is designed to do one simple thing—replace your income in the event you die.

Consider No Medical Exam Insurance

In the past, getting life insurance meant going through a complete medical exam just to apply! You had to do a drug screening, get on a scale, and even have your blood drawn. But during the coronavirus pandemic, touchless exams and no medical exam policies have become more common. For customers who want to skip medical exams, it’s now possible to get rates for life insurance just as good as those available through options that require a medical screening.

How Much Life Insurance Coverage Do You Need?

We can’t say this part too many times: The purpose of buying term life insurance is to replace your income if you die. That’s it. So plan your coverage accordingly. (This handy calculator can help you get a more specific number.)

The rule here is to buy 10–12 times your income in life insurance coverage.

And don’t start thinking that little policy you were offered through your workplace will do the job—those typically only replace around a year’s pay. Beyond the meager coverage, you’ll lose a workplace policy if you have to quit your job because you’re too sick to work. That life insurance strategy is too thin and has too many strings attached. The people who rely on your income today are going to need more substantial and guaranteed coverage when you’re gone.

Maybe you’re the main provider for your household. That means you’re responsible for the groceries in the fridge and keeping the heat on in the house. If you suddenly vanished from the picture without a good term life policy in place, the survivors could be forced to sell their house to carry on.

Your untimely death shouldn’t equal their bankruptcy. Getting enough life insurance coverage in place is essential to guarantee your loved ones have a shot at a relatively stable lifestyle going forward.

This isn’t limited to just you or your spouse. If you’re married, you both need to get term life insurance coverage. And yes, stay-at-home parents need it too.

How Long of a Life Insurance Term Should I Buy?

This is no time to skimp. After all, with term life, you’re already saving a bundle just by avoiding those ridiculous permanent plans.

Think about this: Say you’re young and healthy, so you decide you’re good with getting just a 10-year policy. If you happen to experience new medical issues later, that could make you more expensive to cover next time you want to get coverage. What’s more, future medical conditions could rule out life insurance completely.

So, here’s the rule for how long to set your term: It’s however many years you think you’ll need until your kids will be living on their own. If you plan on adding children in the next few years, a 30-year plan could work well for you. If you already have a few kids in the house and you’re pretty sure you’re done, a 15- or 20-year plan is the way to go.

Get an Idea of the Cost

Buying life insurance isn’t like buying a baseball cap. There’s no one-size-fits-all option—and definitely no sales rack! In general, insurers look at your age, sex and health to figure out how much your policy will cost. On top of that, the length of your policy and the amount of coverage you need will affect your rate too.

Let’s break it down with an example. Sarah is 30 years old, healthy, a nonsmoker and earns $50,000 a year. Since we recommend getting coverage worth 10–12 times your annual income, Sarah would need at least a $500,000 policy. She’s also married and has a 2-year-old daughter, so she’ll want a minimum 20-year term to make sure her family is covered until her daughter is out of the house and into college.

Now, because premiums go up with age, Sarah’s 20-year policy will cost more today than it would’ve in her 20s. On the upside, she gets a slight break just for being female—women pay less for term life than men since they generally live longer. (Sorry, guys.) And because she’s a nonsmoker, that’ll keep her rates on the lower side too.  

Of course, other factors will affect your premium—but one thing’s for sure: Term life insurance costs less than whole life. Always.

Common Mistakes to Avoid

Even when you’re doing the smart thing by shopping for term life insurance, you still need to watch out for a few common mistakes we see folks make. Avoiding these slip-ups can save you time, money and stress down the road. Here’s what to keep an eye out for:

1. Not getting enough coverage: That little policy at work? It won’t cut it. You need 10–12 times your annual income to truly protect your loved ones.
2. Waiting too long to get coverage: Putting off life insurance doesn’t just leave your family unprotected—it can also mean paying more later. Premiums go up as you age, so the sooner you lock in your rate, the better.
3. Choosing a term that’s too short: Trying to save a few bucks with a 10-year policy? Not worth it. Make sure your term lasts until your kids are grown and out on their own.
4. Loading up on riders: Don’t let your agent talk you into a bunch of bells and whistles. A good term life policy is simple and strong—no extras needed.
5. Never reviewing your policy: Life changes fast. That policy you got five years ago might not cut it today. Review your coverage once a year to make sure it still meets your needs.

Compare Life Insurance Companies

Shopping for life insurance takes time and energy. (And who’s got extra time these days?) You’ve got lots of options, but finding the right agent to work with will depend on a few factors like cost, the company’s claim history and whether you want to take a medical exam.

The good news? We’ve already narrowed down the best life insurance companies based on customer experience and how easy they make the application process. Every company on our list offers solid, affordable term life coverage—and they all work with our RamseyTrusted^® partner, Zander Insurance.

If you’re still confused about how to purchase life insurance, don’t worry. Zander’s team will do the heavy lifting by comparing rates for you and helping you pick the right policy. Plus, they’ll stick with you as your point of contact for the life of the policy.

Get Term Life Insurance in Place Today

Even though getting life insurance can feel tedious or even depressing, it doesn’t have to be that way. And getting it taken care of matters. Because even when you’re gone, the people you care about will still be around. By purchasing term life insurance today, you can know that regardless of what comes your way, they’ll have what they need in your absence.

Don’t wait another day. Whether you want to buy life insurance, or you just want to know if you have the right kind, contact our friends at Zander. Their trusted professionals will serve your every need and help you find a term life policy that’s perfect for your family.