Your broker just got back to you with the good news – your life insurance application was accepted. You might be thinking, Great! Now I am done with this process and there is nothing else for me to do. Or you might be more accurately thinking, Great! I’m so excited to complete the necessary steps to get my life insurance policy in force!
Here are those necessary steps:
Step One: Understand the approval
Remember that quote you received before you decided to apply? Here’s a thing that can happen during the underwriting – that quote can go up, depending on what your health looks like or if you regularly participate in some risky activities, like scuba diving.
When you’re approved, your insurance company will let you know if you’ve been approved exactly as you applied, i.e., your rate is the same as the quote you got before you went through underwriting.
If your life insurer offers you a much higher rate than you were originally quoted, check out our article for tips on what to do next.
Step Two: Double check your term and coverage
Now that you’ve gone through underwriting, you’ve officially been classified by your life insurance company and received a rate. (Read more about what the heck life insurance classifications are.) Depending on the rate you received, you may want to buy more coverage or increase your term.
For example, let’s say you ended up getting the best life insurance classification out there, Preferred Plus. Since you’re paying the lowest premiums possible, you talk it over with your partner and decide to get an extra $100,000 in coverage. Why not, right? It’ll only add a few dollars to your monthly payment.
Step Three: Accept your policy
This is as simple as telling your broker that you want to move forward with it. They’ll let the life insurance company know and you’ll be on your way to step four…
Step Four: Receive your policy
Woo! Depending on your insurance company, you’ll receive your policy in the mail or through the internet. Either way, you’ll also get some pretty important papers along with your policy, which you need to…
Step Five: Sign and send back some important papers
Basically, the papers you’ll sign confirm that you’ve received the policy and that you accept the terms. Remember, your life insurance policy is a contract – this is just you signing that contract.
Step Six: Make your first payment
But even if you send in those important papers, all marked up with your John Hancock, your life insurance policy isn’t in force (a.k.a. actually covering you) until you make your first payment.
You have a few options when it comes to payment schedules. Usually, you can choose to pay monthly, quarterly, semiannually, or annually.
But paying monthly (or anything more frequently than annually) isn’t as simple as dividing up the annual premium into twelve equal chunks. Insurance companies usually give people a discount if they’re willing to pay annually – sometimes as much as 8% off! Our life insurance company reviews will tell you which companies give the highest discounts.
If you do decide to pay monthly, remember to set up an auto-withdrawal from your bank account. You definitely don’t want to have to worry about missing a payment on something as important as your life insurance policy.
Step Seven: Review your coverage every year
Life insurance is designed to cover your financial liabilities, and occasionally, your financial liabilities will change. Maybe you have another kid, or you buy a new house and get an even larger mortgage. Or you have less liability and you don’t need a huge life insurance policy anymore.
That’s why it’s important to review your life insurance coverage annually. Reviewing your coverage helps to guarantee that you always have enough life insurance coverage and will give you the opportunity to reduce your coverage when the time comes.
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