How to buy term life insurance

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Term life insurance family under umbrella
Image Credit: Dreamstime

If you want the best protection you can get for your family in the event of your death, it’s critical that you learn how to buy term life insurance.

In fact, term life insurance is the only type of life insurance policy that money expert Clark Howard recommends as a must-have if people depend on you financially!

Here’s what you need to know about shopping for term life insurance

Life insurance should have one purpose and one purpose alone: To replace your income for those who depend on you in the event of your early death.

That means if you have no dependents at all, you don’t need to buy life insurance. Nor should you buy life insurance on a child.

Term life insurance is an easy-to-understand product that simply provides a death benefit to your beneficiaries if you pass away while the policy is active.

There’s no complicated investment component or gradual increase of cash value like with whole life or variable life insurance.

“Simple is better when it comes to buying life insurance, and level term insurance is just about as simple as you can get,” Clark says. “The only purpose of life insurance is to replace your income — or your spouse’s — for your family if one of you dies.”

“Level term” means you buy insurance for a set number of years depending on your age and your family. The premium remains the same all through the life of the policy.

Speaking of premiums, term life insurance is known for its affordability.

For example, we got quotes from multiple providers for a 20-year term life policy with a face value of $500,000. All of them were in the low $40s/month for a 44-year-old male, non-smoker, in good health in the state of Georgia.

In this article, we’re going to walk you through the process of buying term life insurance and the six steps to follow…

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Table of contents: 

  1. Decide how much life insurance you need and for how long
  2. Identify financially strong companies
  3. Gather any necessary medical history
  4. Get multiple quotes and compare them
  5. Schedule your medical exam
  6. Make your first monthly premium payment

1. Decide how much life insurance you need and for how long

As we mentioned earlier, life insurance is meant to replace your income if you die prematurely and leave dependents behind. Clark’s rule of thumb is to buy an amount equal to 10 times your salary, before taxes.

“So if you make $40,000 a year, I like for you to get $400,000 of life insurance to replace your income,” Clark says.

Term life insurance is typically sold in increments of 10, 20 or 30 years.

Which term you should buy depends on your age and the age of your family. For example, if you have young kids and you want to provide financial security for them until they are adults, you would probably want a 20-year term policy.

But maybe you’re 35 and it’s just you and your spouse of a similar age. In that case, you might want a 30-year term policy to provide for the bulk of the remainder of your spouse’s life.

A 30-year term policy would get them through until they reach normal retirement age and can claim Social Security.

2. Identify financially strong companies

You need to make smart choices when you’re buying insurance. Start by only choosing to do business with insurance companies that are likely to stand the test of time and be there down the road if your family needs them.

A.M. Best, a credit rating agency with a unique focus on the insurance industry, is the single best source to check as part of your research, according to Clark.

That’s because A.M. Best grades insurance companies with letter grades that top out at A++.

“I recommend buying only from companies that are rated A++ or A+ by A.M. Best,” Clark says. “Even an A is unacceptable. I want you to stick with insurers of top strength, even if you have to pay a little more for it.”

Free registration is required to see the ratings online. Learn more by visiting AMBest.com.


TIP: Type in a company’s exact name when you’re searching for their rating on AMBest.com. For example, a search for “Prudential” on A.M. Best’s website turns up more than 50 results of subsidiaries and holding companies. You need to know that what you’re really looking for is “Prudential Insurance Co. of America,” which, incidentally, is rated A+ at the time of this writing.

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3. Gather any necessary medical history

While you won’t necessarily need any paperwork in front of you to apply for term life insurance, you’ll want to be sure you’re familiar with your medical history and your latest physical exam results before beginning.

The basic intake form you’ll have to fill out when you request a quote online typically involves questions about your gender, nicotine use, general health, state of residence and birthdate — at a bare minimum.

But that’s not the only info you may be asked. You may also encounter questions about any of the following:

  • Height and weight
  • Any medications you’re currently taking
  • Family history of cardiovascular disease, cancer, diabetes, or kidney disease
  • Driver’s license status and disclosure about recent tickets or accidents
  • Zip code
  • Residency status
  • Marital status

4. Get multiple quotes and compare them

When you’re buying term life insurance, it’s important to comparison shop and get multiple quotes. Getting quotes online is easy from a number of sites like:

In addition to getting term life quotes online, there are two other ways you can get a quote:

  1. Work with an independent insurance agent to shop the marketplace and get you quotes from multiple providers.
  2. Call your existing home and auto insurer to see if you can get a discount for bundling a term life policy in the mix.

5. Schedule your medical exam 

As part of the underwriting process, you will likely have to undergo a medical exam to get term life insurance. A medical exam helps assess your level of health so the insurer can put you into a rate class and determine your premium.

The medical exam typically includes the following:

  • Test to determine your blood pressure and cholesterol levels
  • A physical exam

In addition, an insurer may also ask you questions and pull info on softer data points, including but not limited to:

  • Family medical history
  • Occupation
  • Mental health
  • Driving record
  • Travel habits

Of course, if you don’t like the idea of undergoing a medical exam, it is possible to get a term life insurance policy with no medical exam.

However, in return for the ease of not having to undergo a medical exam, you should expect to pay a higher premium.

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So unless you have medical issues that would necessitate you having to buy no medical exam life insurance, you’re better off submitting to a medical exam as part of the traditional underwriting process.

6. Make your first monthly premium payment

When you’ve gone through the process of learning how to buy term life insurance, hopefully you’ll arrive at a quote that comfortably fits in your budget from a provider you’re confident in.

The final step is to seal the deal by paying your first monthly premium!

Many insurance companies will want to do an auto-deduction from a checking or savings account to make sure they get paid every month in a timely manner.

Clark has often talked about the dangers of allowing a company to automatically deduct money this way on a monthly basis.

This is especially true whether you’re talking about a utility company, a health club, a mortgage lender, a cable provider or a cell provider. But because term life insurance is so important for your family’s safety, you get a pass on Clark’s usual rule.

Final thought

If you earn an income and you have people who depend on that income to live, you need to have a life insurance policy in place.

If you don’t, suddenly the paycheck you’ve been bringing in will disappear for good from their lives if you die. Then, your loved ones will be left struggling to make ends meet — all while mourning your loss.

So, buying term life insurance is the best thing you can do to protect your family.

When you’re ready to start getting quotes, see our guide to the best life insurance companies. Clark has several picks for the top life insurance companies that offer long-term financial strength and affordable premiums.

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