What Is a Life Insurance Quote?
In its most basic form, a life insurance quote is an estimate from an insurer that states the expected amount of money you will pay to secure the life insurance you want. It's a common step you'll take when researching different life insurance options and allows you to assess overall affordability and review the terms and conditions associated with the policy.
Before you start collecting life insurance quotes, it's important to understand what life insurance covers, how quotes work, and how you can request quotes. Here's what you need to know.
What is life insurance?
In the simplest sense, life insurance is an agreement between you and an insurer that states how much the insurance company will pay you in the event of your death if you pay the premiums. Along with the insurer providing an agreed upon dollar amount, your life insurance policy tells the insurance company who should receive the funds. Usually, the people who receive the money are identified as the policy beneficiaries.
Functionally, life insurance is a financial safety net for the deceased's beneficiaries. Classically, it is used to provide funds to spouses, children, or other individuals who may be suffering financially from the loss of a loved one.
What does life insurance cover?
In general, life insurance is a death benefit. It provides a specified amount of money to specified individuals when the person covered by the policy dies.
Life insurance covers many causes of death. Natural causes and accidental deaths have the widest support. However, policies may also cover deaths related to murder or suicide, usually with certain limitations.
In most cases, there are no restrictions on how the life insurance money is used. Some beneficiaries spend the money first on end-of-life expenses. They can then use the rest to cover various living expenses, repay debts or for other purposes.
How do life insurance quotes work?
As mentioned above, a life insurance quote is a document that describes the details of your potential policy and the associated costs in the form of premiums. According to the New York State Department of Financial Services, life insurance premiums are primarily based on mortality and interest. Mortality refers to a person's risk of death, and insurance companies factor in estimated payout costs based on the claimant's physical condition. Interest is the amount of earnings the insurer can expect to make when it invests your premiums.
When you request a quote from a life insurance provider, you need to provide a number of details about what you want in your cover. Usually, the primary is the dollar amount you want your survivors or beneficiaries to receive upon your death. The type of policy you choose – for example, whole life vs. lifetime – but it is also a decision that affects the contract.
By looking at your probability of death, the amount the life insurance company will pay out after your death, and the amount of money it can make from your invested premiums, it sets the price of your policy. In addition, insurers usually factor in administrative and operating costs that may increase your premiums slightly.
Can you get life insurance quotes online?
There are companies that allow you to get life insurance quotes online. Additionally, there are online marketplaces that allow you to check quotes from multiple insurers at the same time. However, whether you can buy the policy directly online varies. Many life insurance companies require additional steps – such as medical examinations – before issuing policies. As a result, it's best to review the insurer's entire process before move forward.
