Many couples start thinking life insurance when they have their first baby but put it off because it seems like a confusing topic to approach. Well let’s dispel that myth here and go over the life insurance process step by step.
First, Determine Your Need
It’s important to determine your goals when discussing how much life insurance you need. The easiest way to approach it is as income replacement for at least 10 to 15 years so that your family can maintain the lifestyle that you have provided for them. You also want to include mortgage, college education for the kids, final expenses, and any other possible liabilities. If it all seems to daunting of a task, you can use a life insurance calculator or talk with a professional.
You will also want to figure out what type of coverage you need. Basically there is a term life insurance and permanent life insurance. Term is set to expire after a set amount of years at which point you won’t have any coverage unless you choose to convert it. This is great for temporary needs like a mortgage or college expenses. Once that need expires you won’t need as much coverage, at which point you can secure a permanent policy for more permanent needs, like final expense or income replacement.
I always recommend starting with what you can comfortably afford at the time. Which is why many people choose term due to its much lower rates.
Comparing Quotes
The next step after determining your need is to compare quotes with all of the companies. Your rates are determined by your age, gender, and overall health. It’s always best to work with an independent agent or agency to avoid overpaying for coverage. Just to put things into perspective, lets run a sample quotes and see how much we can save.
If we run a quote for a 40 year old male, non smoker, at a healthy rate for a $500,000 20 term life insurance policy, here is what we get.
Lowest Rate: $488 Annually
Highest Rate: $560 Annually
As you can see it’s always worth comparing.
Apply
If you work with a knowledgeable independent agent, they will pre qualify you and recommend the best company for you and next comes the application. This usually involves some basic health questions and your personal information such as your social security number and driver licenses number. This will be used to check your medical records and driving history during the underwriting process. The medical exam will also be scheduled at this point. The best tip i can give is be 100% honest during the application to avoid surprises.
The Medical Exam
Unless you opted for a no medical exam policy, you will have to take a medical exam that will occur at your convenience, at a time and place of your choosing, free of cost. The medical exam will run like a normal doctors checkup. The nurse will come out to your home and measure your height/weight, blood pressure, and take a blood/urine sample.
Underwriting
This is the portion that takes the longest but involves the least effort on your part. The life insurance company will take 6 to 8 weeks (unless you opted for no exam coverage) to review your application, medical exam results, medical records and background history. After its complete your rate will be determined and whether or not you qualify for what you applied. Because rates are fixed by the law it doesn’t matter if you work with an independent agency or the company directly, it’s the same cost, so its always best to work with a professional not tied to any particular company.
Takeaways
In summary the biggest take away is work with a knowledgeable independent agent that can give you honest service and put you with a company that will benefit you. A professional can help guide you through the process and because of the digital age, you can probably find a good agent online without having to be limited to your local agencies. Overall life insurance isn’t to complex if you just focus on your families need and do your diligence as a modern day consumer.
