Life insurance companies and coverage
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You can protect your family with a valuable death benefit for less than you probably think.
What affects the cost of a policy?
It's more about what you want in a policy and less about the company you get it from.
1. Type of policy
2. Coverage amount
3. Life expectancy
Type of policy: permanent policies typically cost more than term
All life insurers issue policies that pay death benefits to your loved ones. But policies don't all work – or cost – the same: Term policies provide lower-cost temporary protection, while permanent policies can provide life-long protection with wealth-building benefits:
Term life insurance
This form of protection lasts for a limited time, typically 10, 15, 20, or 30 years. Most term policies feature "level" premiums, but with some, rates may periodically increase, for example, at 5-year intervals. It's can be easy to get a quote and buy term life, and it can also be more cost-effective than a permanent whole or universal life insurance policy. However, when your term ends, you're no longer protected – you either have to apply for a new policy at a higher cost (because you're older) or go without. However, many term policies (such as those from Guardian) may let you transition to a permanent policy in the future. You may also be able to get a policy through your employer at a lower group rate.
Whole life insurance
This is permanent life insurance that can provide guaranteed protection for the rest of your life while earning additional cash value that can be used for things like policy loans or even cash to help in retirement. Whole life policies don't expire as long as your regular premiums are paid. A mutual life insurance company (such as Guardian) may also provide dividends, helping you fund life's other financial opportunities.2,3,4,10
Universal life insurance
Like whole life coverage, this type of policy provides permanent protection and can earn additional cash value. However, universal life insurance can give the added flexibility of adjusting your monthly payments within a specific range to help you better deal with changing circumstances.5
Coverage amount: the more you get, higher are your rates
Term life insurance tends to be cost-effective, in the sense that you can get a given benefit amount typically for less than it would cost with a permanent policy. Still, for any given type of policy from any company, a higher death benefit will cost more than a lower death benefit.
How much do you actually need?
That's an entirely personal decision, based on where you are in life and how many people rely on your income. However, there are several ways to get an estimate. Our life insurance calculator uses the "Human Life Value" method, which looks at what you're earning now plus what you expect to earn in the future. (That's why it has permission to ask about your earnings.) Between the ages of 18 and 40, it multiplies current income by about 30; as you get older and have fewer working years left, that multiple decreases.6 You'll also find reference to other rules of thumb to estimate your needs, including:
Consider multiplying your income by 10
Take your annual salary, add a "0" at the end, and there's your amount. $50,000 salary equals $500,000 of coverage, $75,000 equals $750,000, and so on. While this estimation method is very simple, it doesn't consider your true expenses and needs. That leads us to the next formula, which is just a bit more complex.
Consider multiplying your income by 10 – and add college for each child
This approach gives you the added reassurance of knowing your children may have more opportunities. How much should you add? Account for somewhere between $100,000 and $150,000 per child. If you split the difference – and have two kids – that's an extra $250,000.
Consider the DIME formula
DIME stands for Debt, Income, Mortgage, and Education. With this estimation method, your life insurance need is the sum of all those financial obligations:
Debt: Total all your debts other than your mortgage, and add about $7,000 for funeral expenses.
Income: Take your salary and multiply by the number of years you think your family needs protection – or at least as long as you have children at home.
Mortgage: Look at your last statement and get the payoff amount. If you have a 2 nd mortgage or HELOC (Home Equity Line of Credit), add that in too.
Education: The anticipated cost for sending each of your children to college: between $100,000 and $150,000 per child.
Life expectancy: the insurance company has to assess your risk
One basic rule of life insurance is that it gets more expensive with age. That's because life expectancy goes down – a key factor used to determine rates. There's less risk to insuring a younger, more physically fit person because they are less likely to die in a given time frame – be it months, years or decades – compared to an older, less healthy person.
That's more than just common sense: It's a fact proven by actuarial science, the discipline that applies mathematical and statistical methods to assess risk in insurance and other industries. When you apply for a policy, there's an application and underwriting process: Insurers gather your information, consider your age, and evaluate your health with questions and, typically, a medical exam which includes blood work to check cholesterol levels and so on.
Other items are also taken into account, including lifestyle and gender: Risky habits and dangerous hobbies (e.g., tobacco use, scuba diving) can make a life insurance policy more costly. Conversely, women tend to live longer, so they generally enjoy lower rates.
The average annual life insurance premium per U.S. household is $993.7
How much might you pay? Get an instant term life quote.
There are differences between life insurers. Here's what to look for
All large, nationally known insurers may seem alike, but they aren't. Some are more financially sound than others. Some are easier to work with. Some are more likely to provide the specific features you need. But only a handful of providers can offer you all those advantages. How can you find an insurance company that does? There are objective metrics and factors you can use:
High Financial Strength Ratings
Independent organizations rate the financial strength of insurers to ensure their ability to meet obligations 11.High customer satisfaction scores
Customer surveys and reviews can tell you how satisfied others are with a company's services. Many in the industry consider J.D. Power & Associates to be a reliable source of insurance satisfaction data because they conduct an annual customer satisfaction survey of more than 5,000 U.S. life insurance policyholders. In the 2022 J.D. Power survey, Guardian ranked "Better than most" . 8Low customer complaints
National Association of Insurance Commissioners (NAIC) collects data about complaints with state regulators. According to a recent analysis by Nerd Wallet, Guardian Life has had significantly fewer complaints to state regulators than expected for a company of its size over the last three years. 9Product selection and customization
Some providers focus on term insurance, while others offer both term and permanent with various optional riders that tailor a policy to your needs 12. For example, Guardian provides convertible term and permanent policies and even has options to help cover people with certain kinds of pre-existing conditions – such as certain cancers, heart disease, even HIV.Policyholder dividends
Some insurers are owned "mutually" by their policyholders, who get dividend payments that may otherwise go to shareholders. For example, when you purchase a whole life policy from a mutual insurance company like Guardian, you may get paid a dividend on your policy's cash value portion, helping to build your cash value further.Direct underwriting
Some providers issue their own policies, like Guardian. Others act as a middleman, which can add costs to your premiums and an additional layer if you decide to change your policy – or if your family needs to collect death benefits.
How to buy life insurance
Through your workplace
One place to start is your workplace, as your employer may offer life insurance at lower group rates. If offered, think about enrolling. It's generally cost-effective and easy to buy. Your employer has done the work of finding a policy, and enrolling typically requires little more than signing a form. You may be able to obtain this coverage without taking a medical exam or providing medical records. However, the benefit amount offered may be limited, and you might want more protection to help provide financial confidence to your loved ones. Fortunately, other options are available.
Online
If you don't have workplace coverage – or you want to supplement it – it can be easy to shop for term life insurance quotes online. Many providers, including Guardian, make it simple to compare rates by giving you instant online quotes with tools that provide an outstanding user experience. On the other hand, if you're looking for a whole or universal policy that builds cash value, it's harder to find a permanent life insurance quote online. These types of policies can and should be tailored to your individual needs, so it's worth your while to talk things over with a financial professional.
Working with a financial professional
If you're interested in coverage with a cash value component – or you're not sure what kind of protection is best for you – it's a good idea to work with a financial professional. He or she can provide information about the options that fit your immediate needs and long-term goals. If you have a financial professional you trust, ask them how much coverage and what type of life insurance policies to consider. Otherwise, Guardian can connect you with a financial professional who will listen to your needs, tell you about the best ways to meet those needs within your budget, then help you decide.
Get a term life insurance rate quote
Frequently asked questions about life insurance
How does a life insurance company make money?
An insurer collects premiums – typically for many years before they have to pay out a benefit. During that time, they invest the money, and those investment earnings are their primary source of profits.
How are life insurers rated?
Insurance providers are highly regulated by the states, which strive to ensure their solvency so that they can pay their obligations to policyholders. Also, independent rating agencies such as A.M. Best, Standard & Poor's, and Moody's evaluate their financial positions and issue Financial Strength Ratings.
Are there meaningful differences among the big national life insurers?
The largest insurers are financially sound and can provide a range of permanent and term life products to fit most needs. Even so, some are more financially sound than others. Some have a reputation for providing better customer service. And others tend to have fewer customer complaints lodged against them, indicating that they are easier to work with and may provide a higher quality customer experience.
What about insurers that offer "no health exam" policies?
Some insurers issue life insurance policies that don't require a medical exam or even health questions. These "guaranteed acceptance" policies tend to offer limited face amounts and cost much more per $1,000 of coverage than a medically underwritten policy. After all, the insurance company has to assume that applicants have issues with their health status. So while a guaranteed acceptance policy can be an option for seniors who want to cover their final expenses, it may not be a solution for younger, healthier wage-earners who want enough life insurance coverage to provide for a family.