How to compare life insurance policies

Information courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York

When purchasing a car, a TV or even groceries — price is an important consideration. If you have a budget or looking for the best value for the money, it's worth shopping around.

The same is true when you're buying life insurance. But saving money isn't the only factor to consider as you compare life insurance policies. After all, a life insurance policy is a long-term commitment that could have a lasting impact on you and your loved ones.

Why should I comparison shop?

The life insurance you choose could potentially last a lifetime. That kind of commitment makes it important to do your due diligence when shopping for your insurance policy. Compare life insurance quotes, but also weigh the insurance company's level of customer service, its reputation, coverage options and the variety of financial products it offers.

A trustworthy, dependable insurance provider can offer priceless peace of mind. Is it worth saving a few dollars if you must sacrifice your sense of security?

Beyond price, review all the details to find the policy that best meets your needs.

How should I compare policies?

Most life insurance policies share the same primary components, whether you're looking at policies from different providers or those offered by one company. For this reason, we recommend an apples-to-apples comparison.

If you're considering replacing your sports car with a new SUV, it would be prudent to not simply compare the features with your sports car. Instead, it would be more appropriate to assess how well the SUV aligns with your needs. Factors like safety features, seating capacity for the entire family and gas mileage.

The same principles apply when you compare life insurance policies. Instead of gas mileage and safety ratings, though, you'll look at the amount of coverage and the type of policy, two of the biggest factors to consider.

Once you know how much you need and the terms that work best for your situation, it'll be easier to narrow your options.

Uncertain where to begin? Use an online life insurance calculator^{See note1} to get a good estimate of how much insurance you'll need. A life insurance professional is another great resource. They can answer questions and help you weigh each policy.

Even if you're just comparing the offerings from one insurance company, you still need to understand the specific amount and type of coverage required to meet your family's needs.

What factors should I compare?

Your first instinct likely is to compare costs. While life insurance cost matters, the following factors also should impact your decision-making process:

Life insurance coverage amounts

Examine the death benefits offered by each policy. You'll want to make sure the death benefit is enough to cover your family's needs, such as paying your final expenses and debt obligations. Plus, coverage amount is a major factor in policy cost — comparing a $500,000 policy to a $750,000 policy won't give you an accurate understanding of each policy.

Some providers also offer price breaks at certain levels. So, for example, one company's $400,000 policy may cost the same or more than their $500,000 policy if there is a price break at $500,000.

Types of life insurance policies

This is a little more complicated than just looking at the bottom line. Comparing a term life insurance policy to a permanent life insurance policy won't get you anywhere, which is why it's important to consider what type of insurance best suits your need before you really dig into comparison shopping.

You'll also want to consider any future changes in your policy that could affect your life insurance coverage or your life insurance premium. For example, it wouldn't be accurate to compare a level term policy to an annual renewable term policy, or ART. You'll want to take the total cost over the level period and compare it to the total cost in the ART policy for the same period to make sure you understand which policy might be right for you.

The same is true of the types of permanent life insurance. Are you comparing a universal life policy to a whole life policy? Are you comparing a fully underwritten policy to a guaranteed issue policy? Once you determine the type of life insurance coverage you need, it's easier to compare policies.

Life insurance riders and benefits

Even within the same company, policies offer different benefits and riders. When comparing offers from different companies, look at which extras and benefits are best for you — and how they affect the price.

For example: One company might include a waiver of premium in their quote, and another won't. Their prices likely will be quite different.

Benefits for active-duty military and veterans

Military families face unique challenges and have unique needs. That's why USAA offers life insurance policies with features designed for service members^{See note2}, their families and veterans. These options can help you maintain life insurance protection as you separate or retire.

USAA's level term life insurance policies offer expedited life insurance coverage during deployment, life insurance coverage during wartime and guaranteed SGLI replacement when you separate or retire, among other benefits.

The quote or final offer

Before you decide, it's important to remember that a life insurance quote is different from a final offer price.

If you have narrowed it down to one type of life insurance and a few insurance companies, it might be worth it to go through the application process with both companies so you can look at their final offers side by side.

Deciding

Once you've taken the time to understand the insurance company and the policy amounts, types, features and underwriting, you'll have plenty of information to help you decide if the policy is worth its price.

The important thing to remember is to not let all your effort go to waste. Buying life insurance is a long-term decision and doing so now can give you peace of mind for years to come.