What Is a Life Insurance Quote?

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A life insurance quote is, at its most basic, an estimate from an insurer outlining the anticipated amount of money you’ll pay to secure the life insurance coverage you want. It’s a common step you take when exploring various life insurance options, and it allows you to assess overall affordability of and review the terms associated with a policy.

Before you start gathering life insurance quotes, it’s critical to understand what life insurance covers, how the 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 outlines how much the insurance company pays out in the event of your death, as long as you pay your premiums. Along with the insurer providing the agreed-upon dollar amount, your life insurance policy tells the insurance company who should receive the funds. Typically, the people who get the money are identified as the beneficiaries of the policy.

Functionally, life insurance is a financial safety net for the beneficiaries of the deceased. It’s classically used to provide funds to spouses, children, or other individuals who may suffer financially from the loss of a loved one.

What Does Life Insurance Cover?

Generally speaking, life insurance is a death benefit. It provides a set amount of money to specified individuals when the person covered by the policy passes away.

Life insurance covers many causes of death. Natural causes and accidental deaths are the most broadly supported. However, policies may also cover deaths relating to homicides or suicides, typically with some limitations in place.

In most cases, there aren’t any limitations regarding how money from a life insurance policy is used. Some beneficiaries spend the money on end-of-life expenses for the deceased first. Then, they may use the rest for covering a variety of living expenses, debt repayment, or other purposes.

How Do Life Insurance Quotes Work?

As mentioned above, a life insurance quote is a document that outlines the details of your potential policy and its associated cost 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 insurers factor in the estimated cost of a payout based on an applicant’s physical condition. Interest is the amount of earnings the insurer can expect when it invests your premiums.

When you request a quote from a life insurance provider, you have to provide a range of details about what you want in your coverage. Usually, the primary one is the dollar amount you want your survivors or beneficiaries to receive upon your death. However, the policy type you choose – such as term life vs. whole life – is also a decision that influences the agreement.

By examining your likelihood of death, the amount the life insurer will pay out upon your passing, and the amount of money it can earn on your invested premiums, it sets a price for your policy. Additionally, insurers usually factor in administrative and operational expenses, which can push your premiums up slightly.

Can You Get Life Insurance Quotes Online?

There are companies that let you get life insurance quotes online. Additionally, there are online marketplaces that allow you to review estimates from several insurers simultaneously. However, whether you can purchase a policy directly online varies. Many life insurance companies require extra steps – such as medical screenings – before issuing policies. As a result, it’s best to review the insurer’s entire process before moving forward.