Cost & Coverage
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Getting the life insurance coverage you need takes a few steps but it doesn’t have to be complicated if you are prepared. We’ve broken each step down to make things easier for you.
First things first, determine how much coverage you need and the type of policy you should get to adequately protect your loved ones
Preparation is key for the underwriting process — collect all of your medical history and financial documents before your phone interview
The insurer will want to take a comprehensive look at your background to determine your policy premiums
Your policy does not go in force until you sign your final policy documents and pay your first premium
Life insurance is a risk management tool that protects your loved ones if you die unexpectedly. If you cover any of your dependents’ expenses, then having adequate life insurance coverage makes sure they’re not financially strapped if you’re no longer around to do so. The life insurance death benefit protects your beneficiaries from shouldering an immense financial burden, and can pay for college, dependent care, and other debts that your family could be responsible for if you die.
Unfortunately, there is a disparity between when you decide you need life insurance and when you actually get it. We’re here to help you navigate the process so it’s a seamless experience.
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Before you shop around for a life insurance policy, take stock of your current and future expenses as well as any outstanding debts. You’ll want to get enough life insurance coverage so that your family isn’t left paying for those costs on their own. As a general guideline, it’s recommended that you get about 10-15 times your income in life insurance coverage to make sure these costs are covered.
But while getting 10-15 times your income is a good way to make sure your family has adequate financial protection, it’s not always the one steadfast rule you should be following. When you’re buying life insurance, you’ll need to take a look at all your affairs to get a holistic understanding of exactly how much life insurance you need to avoid risking not getting enough life insurance coverage.
If, for example, you have outstanding debts that a loved one cosigned or a spouse that may need to work less or pay for household and childcare if you died, you may need to get more than just the 10-15 times your income recommendation.
Do you have student loans? Or a 20- to 30-year mortgage? These are important considerations when you’re evaluating how much coverage you need. Aside from covering your family’s costs, you want to make sure that you’re providing enough protection that they won’t also be liable for your debts.
For example, if you have a 20-year mortgage of $500,000 that your spouse cosigned, then you will need a policy term length of at least 20 years and an additional $500,000 in coverage so that the entire debt doesn’t fall on your spouse’s shoulders if you pass away. Without this financial cushion, your spouse could lose the house if they’re unable to keep up with payments — and having it in place protects their livelihood.
You want to not only get enough coverage, but you also want a policy that lasts as long as your debts do to ensure that the coverage is intact if you die.
When you’re shopping for life insurance with your spouse, you have to consider not only the financial support you offer them right now but the adjustments your spouse would need to make if you died. Would they need to work less to provide childcare? Or alternatively, would they need to pay for additional childcare without you around? These are important considerations to take into account that can once again mean that you need more than just 10-15 times your income in life insurance coverage.
Raising a child can be…expensive. You not only need to consider the amount you currently put toward child care — but you also want to account for future expenses, like your children’s college tuition. You’ll want to make sure you leave enough behind for your spouse to pay for your kids to afford their education, housing, and meals or to fund a 529 plan for their education.
Add up all these costs to get a sense of what will need to be replaced after you’re gone. Your death benefit should encompass that entire dollar amount minus any liquid assets you already have that your family can use to make up some of the financial shortfalls. A typical breakdown looks like this:
|Raising two kids for 18 years||$413,586|
|Cost of university expenses for two children at 4-year public university||$175,600|
|Credit card debt||$5,000|
|Total financial obligations (Expenses + Debt)||$1,117,186|
|Total financial obligations minus assets (Coverage gap)||$1,097,186|
These costs are based on national averages and can vary depending on each person’s individual circumstance
Check out our life insurance coverage calculator to get a better idea of how much coverage you need to get. You can adjust some of the numbers in our calculator until you hit upon a premium-to-coverage ratio that is in line with your budget.
After evaluating the type of coverage you need and checking out a few different types of policies](https://www.policygenius.com/life-insurance/types-of-life-insurance/), you can decide if you should buy a term or permanent life insurance policy.
Term life insurance is the route most people go — it’s cost-effective and offers the most coverage for the lowest dollar amount. But there may be circumstances where you need a permanent life insurance policy, such as if you have a permanent dependent and need lifelong coverage.
But you’ll also need to evaluate how you want to get that coverage. Are you unable to take the medical exam due to current stay-at-home mandates? Then you’ll want to opt-in for a no medical exam policy, where your medical history is still thoroughly evaluated, but through your previous physicals and labs as opposed to a medical exam conducted by the insurer. Don’t want to risk waiting the 4-6 weeks it can take for your application to be approved? Then you’ll want to consider instant life insurance, which can get you coverage after one quick call.
And while at first glance a no medical exam or instant life insurance policy sounds optimal, each has its own sets of pros and cons. A Policygenius advisor can work with you (for free) to help you decide what the best policy for you would be.
You can make the application process as seamless as possible by having all the documents you need on hand before you apply. These include:
You’ll also want to know your Social Security number, as you’ll likely have to provide it for some preliminary background checks.
Getting a free quote and picking a life insurance policy is easy — by working with an independent insurance agent or broker, like Policygenius, you can get quotes from a number of different insurers right under one roof with just a few pieces of personal information, like your location, age, gender, and basic medical history.
These quotes will feature your prospective premiums and the amount of coverage you’ll receive from various insurers to help you determine the right policy for you. Most people pick the cheapest policy that has the coverage they need, but it’s important to compare other features, like what features and riders a company offers, their customer service and other ratings, and whether or not they’re best for your particular health profile. Compare beyond price to find the best life insurance company for you.
Getting an initial life insurance quote can give you a good idea of the premiums you’ll pay, but the actual application is a little more in-depth. Life insurance companies do a thorough evaluation of your medical history and background, so if they find something you didn’t report, your actual premiums may look a little different than the initial quote you received.
Insurers will check your life insurance application history for any issues— like if you’ve ever been caught lying on an application — and confirm what you reported in your medical history against prescription drug databases like the Medical Information Bureau (MIB). The application may also ask for your driver’s license number to see if you’ve been involved in any accidents.
You’ll be asked to authorize your doctor to share your health information with the life insurance company, known as an attending physician statement (APS). This information is necessary to not only get you the correct policy but could also come into play later when the insurer is paying out your death benefit. If you had any medical conditions that should’ve affected your premiums and you lied about them on your application, the insurer may recalculate the amount they owe to your beneficiaries to account for the missing information.
Additionally, you’ll be asked about your hobbies, lifestyle, financial health — including your income and net worth — as well as about other life insurance policies you have. If you’re the kind of person who attempts to jump the Grand Canyon on a motorcycle, you can probably expect to pay a little more for your life insurance coverage.
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If you opt-in for a no medical exam life insurance policy, then the insurer will continue to look into your medical history and reach back out once they’ve come to a decision about your policy. If you decide to go the traditional route, then at the end of your phone interview, you’ll schedule your medical exam. The life insurance medical exam is meant to get an in-person look at your health at no cost to you. It’s similar to your yearly physical, except that you also have the option of the medical examiner coming to your home or office.
The technician or nurse will take basic measurements like your height and weight, blood pressure, and pulse, and you’ll also provide a blood and urine sample. The entire process should take just about 30 minutes. Although the procedure might seem a little burdensome, you can use the same results on other life insurance applications for up to about six months if you need to postpone your life insurance application. You can also ask the testing company or the life insurance company for a copy of the results, effectively scoring yourself a free medical exam.
The hard part is over — now all you have to do is wait. Behind the scenes, the underwriter you’ve been working with calculates how risky you’re going to be to insure, which determines your health classification and what type of premiums you’re going to pay. This process can take up to four to six weeks, but sometimes longer if they need to verify parts of your application or require any supplemental documentation.
How do they decide what you pay? By looking at the results of your medical exam and the data you submitted with your application. They will cross-reference what the insurer knows about your medical history with what’s in the MIB, looking as far back as seven years ago to see what medications you’ve been prescribed. The underwriter will also learn whether you’ve ever been convicted of a DUI/DWI or reckless driving as well as other traffic offenses.
The most common life insurance classifications, in order from the highest health rating to lowest, are:
People with complicated health histories or recent medical issues may be given a substandard rating, which is assessed via a table rating system.
Once the underwriting process is complete, you’ll be issued a policy offer. If you agree to their terms, all that is left is for you to sign the policy documents and pay your first premium. Your policy isn’t in force until you do so — a policy offer from the insurer doesn’t mean you have coverage.
You’ll also want to take note of the nitty-gritty of your policy — you can choose between paying your premiums monthly or annually (with the latter usually offering a small discount), and this should also be indicated on the policy. You can always change the frequency of payment after the policy is in force by contacting your insurance company.
Depending on the insurer, your policy documents will either be electronically delivered or need to be mailed back. Yes, even in the age of artificial intelligence and driverless cars, you still need to use the post. The same will apply for how insurers allow you to make changes to your policy. Some insurers will let you make changes — like updating your personal information or beneficiaries — online, while others will need to be done via snail mail.
Make sure to keep a copy of the policy in a safe place, and let your beneficiaries know exactly where that place is and how to access it. If your beneficiaries don’t know about the policy, they won’t know to claim the death benefit you’ve been paying for all this time, and having easy access to the policy will help them claim the payout as soon as possible.
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