How Does Direct Term Life Insurance Work?
Direct term life insurance is coverage you buy online from the provider’s website, with no agent involvement required. The policy operates exactly the same way as a term life policy purchased through an agent or broker. The only difference is how you buy the policy.
You choose the term, which is often 10, 15, 20, 25, or 30 years, or until a specific age, such as 80 or 90. Like all types of life insurance, if you die during the term, the insurer will pay cash, tax-free, to your beneficiaries according to the amount of coverage you selected.
If you outlive the term, coverage ends, you stop paying premiums, and you’re uninsured. However, some policies have options to continue coverage.
Some are “renewable,” which allow you to continue coverage at a higher price after the initial term ends. Or they may be “convertible“, meaning you can switch to a permanent policy.
Most direct term life policies have a level premium and death benefit. Conversely, some insurers, such as New York Life, do increase the rates as you get older, even though the death benefit remains fixed.
Direct term life policies with a decreasing death benefit are virtually non-existent.
Applying & Qualifying For Direct Term Insurance
To apply for direct term life insurance, you will either complete the entire application on the provider’s website or by calling them.
Be prepared to provide ample personal information, such as name, DOB, SSN, driver’s license, employment and salary data, address, beneficiary names, and method of payment details (credit card or bank information).
You’ll have to answer a series of health and lifestyle questions. In most cases, direct term life policies don’t require a medical exam. However, one could be requested due to your medical history.
If approved, the insurance company will mail you the policy, and your premiums will begin on whichever date you prefer. However, if you’re declined, they will send you a letter via US mail informing you of their decision.
Pros And Cons Of Direct Term Life Insurance
- You can actually see quotes online: Many websites claim they will show you a price, and once you submit your information, they tell you to expect a phone call (or an agent simply comes to your home). Direct term life companies do indeed show you the rates before you apply.
- Full online application: Applying entirely online is much more convenient and faster than filling out paper forms.
- There is usually no medical exam: You’ll have to answer health questions (there are no guaranteed acceptance term life policies), but a medical exam will not be a baseline requirement.
- You’re not required to speak to an agent: There is no default requirement to speak with a licensed agent.
- No sales pressure: Sadly, some licensed sales agents try to pressure people into buying insurance now, which nobody enjoys. Since you’re buying online, this is not a concern.
- Buy at any time 24/7: Since it’s all online, you can apply at literally any time of the day that fits your schedule.
- Rapid approvals: It’s not uncommon for direct term life applications to render an underwriting decision within minutes or a few days.
- No personal point of contact: Without an agent, you will not have a designated person who is familiar with you, your policy, and your needs. You’ll always have to call the insurer’s general phone number and speak to a new person each time you need service on your policy or have questions.
- Larger coverage limits won’t be available: Companies with direct term life policies typically don’t offer coverage amounts exceeding $1 million.
- Few companies to choose from: According to the American Council of Life Insurers, there were 737 life insurance companies in the USA in 2021. Conservatively, less than 1% of them offer direct term life insurance. If you’re committed to buying term life insurance online without talking with an agent, you’re excluding nearly the entire life insurance market.
- No way to know ahead of time if you’ll qualify: Without guidance from an agent, you have no way of knowing whether the insurance company will approve you. While it’s not always the case, getting declined for a life insurance application can make it harder to get approved with another insurer.
How Much Does Direct Term Life Insurance Cost?
Below are sample direct term life insurance premiums for a 10-year term policy.
Is Buying Direct Term Coverage A Good Idea?
It’s certainly not a bad idea to buy direct term life insurance because, after all, you’re buying life insurance, which is never a bad thing. The primary consideration is whether it is better than the alternative: buying through a licensed broker.
Everyone has their preferences, but there is a strong case to be made for buying with an agent’s help. Here’s what you get with agent assistance:
- A permanent single point of contact that you can call for help. No need to deal with lengthy call menus or foreign call centers that can be difficult to understand.
- Risk assessment before you apply, so you’ll know if you qualify.
- Access to the entire life insurance market rather than limiting yourself to less than 1% of it.
- Guidance regarding which insurer out of many will be your best option based on your health, budget, and needs. Agents can shop multiple providers on your behalf to identify which one offers the best deal.
- A professional who can explain the ins and outs and pros and cons of each policy.
All of those benefits come at no cost to the policyholder, and the insurance itself will not cost more because you bought through a “middleman”.
Below is a table that outlines side by side the differences between buying direct term life insurance and one bought through an agent.
| Benefits | Direct Term Life Insurance | Term Life Insurance Bought Via An Agent |
|---|---|---|
| Single point of contact | No | Yes |
| Ability to compare quotes from multiple insurers | No | Yes |
| Guidance up front about what you're eligible for along with an accurate cost estimate | No | Yes |
| How are quotes seen | Online | After a phone call or email exchange |
| Full online application with no human interaction | Yes | No |
| Fast underwriting decisions | Yes | Yes |
| No medical exam options | Yes | Yes |
| How much of the life insurance market you'll have access to | <1% | >99% |
| Access to any amount of coverage | No | Yes |
Companies That Offer Direct Term Life Insurance Policies
Here are some popular examples of life insurance companies that sell direct term life insurance:
- Globe Life
- New York Life (the AARP life insurance program)
- TruStage
- Physicans Mutual
- AAA
- Gerber Life
- Nationally licensed life insurance agent with over 16 years of experience.
- Personal annual production that puts him in the top .001% out of all life insurance agents in the nation.
Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
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American Council of Life Insurers. https://www.acli.com/-/media/acli/public/files/factbook/11fb22chapter11industryrankings.pdf
