Thinking about buying a life insurance policy, but don’t know where to start? You’re not alone: Buying life insurance is very different from buying car or rental insurance, and it’s usually a longer process. Fortunately, shopping for life insurance doesn’t have to be difficult or confusing. Bankrate’s editorial team has put together a step-by-step guide to buying a life insurance policy. We also provide some helpful tips for choosing the right amount of coverage and getting the most affordable premium.
how to buy a life insurance policy
Shopping for life insurance can seem complicated if you’ve never done it before. Unlike home or auto insurance, there are many types of life insurance policies. each one comes with pros and cons, and different price tags.
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Although some life insurance policies can be purchased online, it is more common for life insurance policies to be purchased through an agent. Even if you can start a quote online, you often need to speak to an agent to finalize the transaction. In addition, there are some aspects of the life insurance purchase process, such as a medical exam, that must be completed in person.
If you’re in the market for life insurance, here are steps you may find helpful in purchasing a policy that’s right for you.
1. decide how much coverage you need
The first step in getting life insurance is finding out how much coverage is right for you. In general, you should probably consider purchasing enough coverage to support your financial dependents for several years after your death, depending on your current lifestyle and financial situation.
Although there are many ways to calculate a potential coverage limit, a popular method is the dime formula, which takes into account your debt and final expenses due, total income based on what you might need after your death , the amount remaining on your mortgage, and any pending or expected expenses for education. You can also use an online coverage calculator for help.
2. choose a type of life insurance policy
There are two types of life insurance coverage: term and permanent. While there are many types of permanent insurance, the ones we’ll focus on here include comprehensive and universal. term life insurance is usually less expensive and offers fewer benefits, while permanent life insurance is usually more expensive since it offers more benefits. Here’s a closer look at what these policies cover and how they work:
- Term Life Insurance: Term life insurance is generally the cheapest type of life insurance while you are young. provides coverage for a specified period of time, usually between 10 and 30 years. term life insurance is used to provide financial support to your designated beneficiaries. For example, if you die during the term, your children or spouse will receive a payment from the insurance company. once the term expires, the benefits end, unless the policy is renewable or convertible.
- Whole Life Insurance: Whole life is a type of permanent life insurance that provides lifetime protection under most circumstances, with fixed premiums and cash value. If you obtain insurance from a mutual company, the policy may also be eligible to receive dividends based on the company’s financial performance. With some whole life policies, policyholders have to pay their premium until they die, and other policies only require a premium for a certain number of years.
- Universal life insurance: Universal life insurance is another type of permanent coverage. builds cash value, where money grows at a current market rate or fixed interest rate. There are several forms of universal life insurance, including variable universal life insurance and index universal life insurance.
You may want to do more research to find out which option best suits your needs.
3. research different life insurance companies
Next, you’ll want to find some life insurance companies that appeal to you. Remember that no two companies are the same. When choosing a life insurance company, search the website and look at the policy options. The best life insurance company for you can offer you a combination of competitive rates, coverage options that fit your insurance needs, and a positive customer service experience. You can get an idea of a company’s level of customer service by reviewing j.d. power studies for life insurance. Check a company’s financial strength by reviewing ratings from AM Best, S&P, and Moody’s.
4. request multiple life insurance quotes
Once you’ve selected a handful of potential vendors, get quotes from each company. Most companies don’t list the price of premiums on their website, so getting quotes will help you determine which provider can offer you the most affordable rate. Most major life insurance companies have an online quote generator that allows you to get an instant quote directly from their website. if not, contact an agent.
When you request a quote, you will typically be asked to provide certain personal information, such as your age, address and gender. In addition, you may need to submit basic information about your medical history. You are usually asked about your lifestyle, smoking history, previous surgeries, and medications you are taking. Official medical records are generally not required to obtain a quote. the insurance company will use the information provided to calculate your life insurance rate.
5. fill out the application
After choosing the provider that fits your needs, the next step is to complete an application. You will be asked to include basic personal information, such as your social security number and driver’s license number. In addition, you may be required to submit an Attending Physician Statement (APS), which helps the insurance company verify your medical history. aps ensures that you get the correct policy and is used when calculating death benefits. Most life insurance applications can be completed online, and it’s usually a quick process.
6. prepare for your phone interview
After you submit an application, the insurance company may request a second telephone interview. The interview is primarily used to confirm the information you included on the application, but you may be asked some additional questions. For example, the interviewer will want to know more about your lifestyle and hobbies, your financial health, your income, and any other life insurance policies you have. the interview is usually quick and will be scheduled shortly after you submit your physical application.
7. schedule a life insurance medical exam
Many life insurance companies require applicants to undergo a physical exam before coverage is approved. The life insurance medical exam is like a regular medical appointment, but the insurance company’s medical examiner will visit your home or office to see you. They will take your vital signs, such as height, weight, and blood pressure, and draw blood. The exam usually takes about 30 minutes and can be scheduled during your phone interview.
However, not all life insurance policies require a medical exam. If you meet certain requirements, you may be able to get approved for coverage without an in-person exam. While this can speed up the approval process, policies without a medical exam are often more expensive because they are riskier for the insurance company.
If you’re healthy enough to pass a medical exam and don’t mind waiting a few weeks to get approved, it’s generally recommended that you get a medical exam because your rate will likely be much lower.
8. wait for approval
When the application process is complete, your job is done. The insurance company’s underwriter will take the information she gathered from her application, phone interview, and medical exam to determine if she is eligible for coverage and, if so, what her premium is. Because there is so much information to review, the approval process can take several weeks or up to a month.
If you are approved and satisfied with the quoted premium, the policy documents will be sent to you for your signature and approval. Although traditionally this process is carried out with a physical copy, technology sometimes allows this procedure to be completed with a digital signature. You’ll also decide if you want to pay your premium monthly or yearly. After the policy documents are signed, you may be required to mail a physical copy to your insurance company. it is generally recommended to have a second copy on hand at home.