Guide to Buying Life Insurance

Who Needs Life Insurance?

Before you start looking for life insurance, figure out whether you truly need it. It’s not essential for everyone. If you’re single and without any dependents who may be burdened by your debt, life insurance may not be a focus right now.

However, those with a spouse, long-term partner, children, or other dependents who rely on them for financial support, should seriously consider getting life insurance.

You may also choose to get insurance if you financially support your aging parents. You can ensure that they receive the care they need should you pass away unexpectedly.

1. Compare Methods for Buying Life Insurance

In most parts of the US, you have several options for buying a new life insurance policy. This includes:

• Local insurance agents
• Online brokers
• Life insurance companies

Working with a local insurance agent offers a more personalized approach. Local agents take the time to listen to your unique needs and find options that fit your requirements. This may save you time finding the perfect match.

Independent online brokers offer some of the same advantages as working with local agents, including the ability to compare options from a variety of insurance companies. However, with a digital-only approach, you don’t get the same level of personalization as with a local agent.

You can also go directly through an insurance company. Many insurance companies have websites where you can get a free quote in minutes. You may be able to get a quote online or over the phone.

You may also try using multiple methods. You can contact insurance companies, work with an online broker, and contact a local agent to shop around for the best value.

Life Insurance Through Employers and Financial Institutions

Some employers offer life insurance to employees. This life insurance may be included as part of your pay package or offered separately. However, the coverage offered may not meet your needs. You may still require a separate policy to ensure that your beneficiaries are well cared for.

Financial institutions, including credit unions, may offer life insurance policies to customers. These policies may be offered through a partnership with a life insurance company. As with employer-provided life insurance policies, these options may have limited coverage and fewer options for customizing the policy to meet your needs.

2. Research Insurance Companies

Whether you get life insurance through an agent, a broker, or directly through an insurance company, you’re ultimately buying the policy from the insurer.

You need to ensure that the insurance company you choose is reputable and has the financial stability needed to pay your death benefit years from now. Look at consumer reviews and financial security ratings from independent rating agencies, such as Fitch Ratings and AM Best.

3. Choose the Right Type of Life Insurance

You have a variety of options when it comes to life insurance. Some of the main types of insurance include:

• Term life insurance
• Whole life insurance
• Universal life insurance
• Final expense insurance

Term life insurance includes a set contract length. It’s a top recommendation for those who want coverage for a short-term period, such as while your children are growing and still living in your home.

Whole life insurance is a permanent insurance plan with fixed premiums and a guaranteed death benefit. It’s a good choice for those who want a simple, straightforward policy for life. If you prefer greater flexibility, consider getting a universal life policy. You can adjust the death benefit as needed. Both options include cash value accumulation, which you can borrow against as a low-interest loan.

For older adults looking to cover funeral costs, consider getting final expense insurance. The maximum death benefit is often smaller compared to other options, but you may avoid the need for a medical exam.

4. Set the Death Benefit Amount for Your Policy

Decide how much coverage you need. You should ensure that the death benefit is large enough to provide the outcome you want. For example, if you’re married with kids, you may want to leave enough behind to ensure that your family is financially set for years to come. You may also want to cover debts, such as your mortgage and credit card bills.

Total all the expenses that you want to cover with your death benefit. Use this as a starting point to ensure that you get enough coverage.

5. Submit Your Application

After deciding on the details of the policy, submit your application. The application process is different from one insurance company to the next. However, you’ll typically need to provide details on the following:

• Health information
• Family medical history
• Income and employment
• Lifestyle
• Risky activities

You’ll also likely need to name the beneficiary for your policy. The beneficiary is the person who receives the death benefit should you pass away. In most cases, the beneficiary is a spouse or a trusted family member.

6. Complete a Medical Exam

Many insurance policies require applications to complete medical exams. A full medical exam allows insurance companies to get a better sense of your health. They use this information to assess your mortality and the risk of insuring you.

Some medical issues may disqualify you from getting coverage. Insurance companies may also offer alternatives for those who get disqualified. For example, you may be able to apply for guaranteed life insurance if you don’t meet the criteria for a whole life or universal life policy.

7. Purchase Your Policy

After completing your medical exam, the insurance company’s underwriters review your application. This process may take several days to several weeks, depending on the information that they want to review.

If the insurance company approves your application, they’ll send you a copy of the policy. In most cases, you’ll need to sign and submit a copy of the policy along with the first premium payment. Some companies may also collect your payment information during the application process and automatically charge you should you accept the policy.

The policy typically becomes active after the company processes the first payment. Retain a copy of the policy for your records.

With these steps complete, you’re all set. Just make sure to continue paying the premiums to avoid losing coverage.