Money Management

How to Buy Life Insurance When You Don’t Have a Clue

Written by SoFi

No one likes to think about what would happen if they were to pass away. But people who have family members and loved ones who depend on their income, it’s an important thing to consider.

Although it’s not the only way to protect dependents, life insurance can be an important part of ensuring a family’s needs are met if their primary source of support is not around to meet them—which is well worth the uncomfortable feelings the topic might stir up.

Figuring out how to get life insurance from start to finish can be broken down into simple steps so this not-so-fun task doesn’t feel overwhelming and confusing to boot.

Step One: Determining What Type of Life Insurance Is Needed

The first step in learning how to buy life insurance is to get really clear about what, exactly, the products are.

Life insurance is a protective financial plan that provides a lump-sum payment to designated beneficiaries when the insured person dies.

Will a person’s dependents still be reliant on them in 10, 20, or 30 years? This is an important question to consider in choosing term life insurance.

If someone is deciding on a life insurance policy when their youngest child is already 15, for example, a 5- or 10-year term may make sense—but a 20- or 30-year term might not.

Does the insured have dependents who will be reliant on their income for the rest of their life or have a collection of assets that may be subject to estate tax? It is important to look at all of your options to determine if a whole life insurance policy or a term one makes more sense for you.

What is the insured’s level of risk tolerance? If signing up for a variable or variable-universal life insurance policy, investment risk will be part of the picture.

How Much Life Insurance Coverage Is Needed?

Along with choosing the best type of plan for a person’s individual needs, they must also consider how much life insurance they require.

Term life insurance policies tend to run from about $20,000 to $10 million. That’s a broad range! How can someone determine how much coverage is right for their family’s needs?

The idea is to ensure that family members are well cared for in case of the insured’s death, so many experts recommend a life insurance policy of about 10-15 years worth of income. However, the most accurate way to determine how much life insurance to purchase is to break down the expenses the family might be expected to meet should the insured pass away.

Along with basic living costs, it might be wise to keep additional expenses such as children’s college tuition and the cost of the insured’s own funeral, which can add up to as much as $10,000 or more on its own. Loved ones may also be on the hook for debt left after the insured’s death if they co-signed on it.

Taking every expense—and every asset—into consideration when deciding how much coverage is appropriate is an important part of deciding how much life insurance to buy. Keep in mind that as time goes on, prices tend to go up; factoring in inflation is also important.

While many calculators are available online to help people determine how much life insurance they might need, a professional financial planner is likely the best resource for making a customized, specific plan with individual circumstances in mind. Which leads to the next—and in many ways, most important—step in the process.

Step Three: Choosing a Provider

Life insurance is just one of a sea of insurance policies a person may own or plan to own: Homeowners insurance, renters insurance, and auto insurance are just a few of the types of insurance policies available. (In fact, some of these insurance policies may even be required by mortgage lenders, or mandated by states in order to legally drive a vehicle.)

And as with these other policies, life insurance can be purchased from a wide range of vendors, both directly and through an agent or broker.

Since many insurance agents work on commission, it’s unfortunately common to run into pushy sales tactics when shopping for coverage. But fortunately, the super-connected, digital world makes it easier than ever to find and purchase insurance policies on a person’s own terms.

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SoFi, for example, has teamed up with Ladder to bring term life insurance coverage to members at affordable rates.

Coverage runs from $100,000 to $8 million and is available in 10- to 30-year terms, all of which can be adjusted at any time. Getting a quote takes just a few minutes and medical tests are not required for eligible applicants.

See how easy getting life insurance through SoFi (powered by Ladder) can be.


Ladder Life™ term life insurance policy made available through Ladder Insurance Services, LLC (Ladder) and underwritten by Fidelity Security Life Insurance Company, Kansas City, MO. Product availability and features may vary by state. Not available in New York. The California license number for Ladder is OK22568. Policy Form No. ICC17-1069, M01069, Policy No. TL-146.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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