Austan D. Goolsbee, professor of economics at Harvard and the University of Chicago, in his paper “Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry,” found that since 1993, online life insurance comparison websites had reduced the average annual premium by more than 20 percent. By using life insurance comparison websites to obtain life insurance quotes and by using the life insurance credit rating website “A.M. Best” to find those life insurance companies with the strongest financial ratings, you can find the best and most affordable life insurance for your budget and needs.
Life Insurance Needs
Ask the following questions to decide if you even need life insurance before you start looking at life insurance quotes online. If you die, is it the case that you or your family will not have enough money set aside for funeral expenses? If you have a family, does your spouse, children or other dependents count on you to meet their basic day to day needs? If you answered yes to these questions, then you probably need life insurance. On the other hand, if you are single, or if your partner contributes to at least one-half of your household income, and/or you have no dependents, you probably don’t need life insurance. In this case, you should just set up a simple interest yielding savings account to cover funeral expenses and then invest the money you would have paid in life insurance premiums.
Calculate how much life insurance you’ll need. Add up all your expenses including credit cards and other loans. Include also the money you set aside for savings and investment. Fred Waddell, a family resource management specialist at Auburn University recommends that you buy life insurance that is at least five times your yearly income.
Decide on the type of life insurance policy you need. There are basically two types: term life insurance and cash-value insurance. Term life insurance provides pre-determined payments for a pre-determined amount of time. Your life insurance premiums go 100 percent to the cost of the policy. A cash-value insurance policy is a combination of a simple term life insurance policy and an investment strategy. With a cash-value insurance policy only part of your premiums pay for the life insurance. The rest goes into whatever financial investment products the insurance company offers. Managing cash-value insurance plans can get complicated because of this investment component. Such plans are good for people who need both term life insurance and an investment plan and are not comfortable making their own investments.
Online Life Insurance Quotes
Open your web browser of choice and type in the type of life insurance you’re interested in, either term or cash-value. For example, if you’re interested in term life insurance, type in "term life insurance quotes" (without the quotes).
Click on those websites that offer a comparison of life insurance quotes from many different companies and collect the web addresses of 5 to 10 or more different sites. At this point, you don’t have to worry about the quality of the sites. Goolsbee found that those who used life insurance comparison shopping websites obtained significantly lower life insurance quotes than those who didn’t.
Rank in order those life insurance quote comparison sites by how many questions they ask. The best life insurance comparison sites are those that ask in-depth questions about your medical and health history. The more questions the site asks the more accurate and reliable your initial quote will be. For example, Forbes magazine online awarded ReliaQuote a No.1 rated life insurance quote provider in part because they asked more in-depth questions than the other comparison sites.
Check the financial soundness of all the life insurance companies that have provided you quotes by going to the A.M. Best site (a life insurance credit rating organization) and rank order the life insurance companies by their A.M. Best rating. A.M. Best assigns ratings that are at least B+ to those life insurance companies that are the most financially secure. Within these ratings, find the life insurance company that offers the most affordable life insurance quote for your budget and needs.