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Getting the life insurance coverage you need doesn’t have to be complicated if you’re prepared. We’ve broken down the steps to make things easier for you.
TABLE OF CONTENTS
Life insurance is a risk management tool that protects your loved ones if you die unexpectedly. The life insurance death benefit protects your beneficiaries and can pay for college, dependent care, final expenses, and other debts that your family could be responsible for if you die.
Once you decide you need life insurance it can take a little time to actually get it. After you choose a coverage amount and type of policy, you’ll still need to pick a provider and go through the application process. Here are some tips to help things go smoothly.
Begin by determining how much coverage you need and the type of policy you should get
Work with a broker to find the most affordable provider
Underwriting includes a phone call as well as a medical exam, unless you opt for no medical exam life insurance
You do not officially have coverage until you sign your final policy documents and pay your first premium
Your life insurance coverage should be customized to your family’s financial needs. Your policy will depend on your income, debts, expenses, and the needs of your dependents. Policygenius experts suggest you get about 10-15 times your annual income in life insurance coverage to make sure these costs are covered for your family.
While 10-15 times your income is a good starting point, your financial situation may require more coverage. Take a look at your finances to get a holistic understanding of exactly how much life insurance you need to avoid having too little coverage.
Do you have student loans or a mortgage? Your death benefit should be high enough to cover what you owe, and your policy should last as long as your longest debt. If your family can’t keep up with the bills, they risk forfeiting your home and/or other assets to collections agencies.
When you’re shopping for life insurance with your spouse, you have to consider not only the financial support you offer your spouse right now but the adjustments they would need to make if you died. Would they need to work less to provide childcare? Or would they need to pay for additional childcare without you around? Factor those expenses into your coverage needs, too.
Raising a child can be expensive. You not only need to consider the amount you currently put toward childcare, but also account for future expenses, like your children’s college tuition. Leave enough behind to pay for your kids’ 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:
|Average annual consumer household expenses||$63,036|
|Raising two kids for 18 years||$413,586|
|Cost of university expenses for two children at 4-year public university||$203,168|
|Average credit card balance||$6,194|
|Average auto loan||$19,231|
|Total financial obligations (Expenses + Debt)||$953,141|
|Total financial obligations minus assets (coverage gap)||$772,841|
Check out our life insurance coverage calculator to adjust some of the numbers until you hit upon a premium-to-coverage ratio that is in line with your budget.
After evaluating the amount of coverage you need, you can decide if you should buy a term or permanent life insurance policy.
Term life insurance is the best option for most people — it’s easy to manage and offers the most coverage for the lowest dollar amount. But there may be circumstances where you need a permanent life insurance policy, like if you have a lifelong dependent.
There are variations on both term and permanent life insurance, each with its own pros and cons. For example, if you want to minimize outside contacts during the pandemic, you might want a no medical exam policy, which skips a medical exam conducted by the insurer. Or maybe you don’t want to risk waiting for your application to be approved. Then you’ll want to consider instant life insurance, which can get you coverage after one quick call.
A Policygenius adviser can help you decide on the best policy for you.
You can make the application process as seamless as possible by having all the documents you need on hand before you apply for life insurance. 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.
Because each life insurance company treats each application differently, you’ll pay the most affordable premiums by shopping around with multiple insurers as opposed to working with just one. Working with an unbiased, independent broker like Policygenius helps you find a company that is favorable for your budget, coverage needs, and health profile at the most competitive price.
According to a study conducted by LIMRA, over a quarter of life insurance shoppers found that working with a life insurance agent eased the life insurance buying process and 97% of the applicants surveyed experienced satisfactory service.
Getting a free quote and picking a life insurance policy is easy — by working with an independent insurance agent or broker, you can get quotes from many 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 riders a company offers, their customer service record and ratings from trusted third-parties like A.M. Best, and whether they’re best for your particular health profile.
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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. Your application will require a phone interview, where you’ll be asked about your medical history, hobbies, and other personal details. 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 databases like the Medical Information Bureau (MIB). The insurer may also ask for your driver’s license number to see if you’ve been involved in any accidents.
You may 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 earn you more favorable premiums if you have a health condition but your doctor reports that you’ve been responding well to treatment.
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 a daredevil with a skydiving hobby, you can expect to pay more for your life insurance coverage.
If you opt for a no medical exam life insurance policy, then the insurer will continue to look into your medical history and reach out once they’ve decided on your policy. If you decide to go the traditional route, you’ll schedule your medical exam after your phone interview. The life insurance medical exam is similar to your yearly physical, except that you also have the option of the medical examiner coming to your home or office and it comes at no cost to you.
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. You can use the same results on other life insurance applications for up to six months if you need to postpone your life insurance application.
The hard part is over — now all you have to do is be patient. Underwriting, which encapsulates your application, phone call, and medical exam, is how the life insurance company evaluates the risk of insuring you and how much you’ll pay for your policy. Once you’ve completed your end of the underwriting process, an underwriter will cross-reference what they’ve learned about your medical history with what’s in the MIB, and check your motor vehicle report for DUI/DWIs or other traffic offenses, then determine your health classification and final premiums.
This process can take four to six weeks, but sometimes longer if they need to verify parts of your application or require any supplemental documentation.
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. Make sure to keep a copy of your policy in a safe place, and let your beneficiaries know exactly how to access it. If your beneficiaries don’t know about the policy, they won’t know to claim the death benefit, and having easy access to the policy will help them claim the payout quickly.
Buying the right life insurance policy might feel overwhelming, but if you know what to expect and work with a knowledgeable broker, you can get the coverage you need quickly and efficiently.
Your life insurance coverage should be at least 10-15x your income and enough to cover your debts.
You can get a life insurance quote online, but most life insurance policies require a phone call with an agent, at the minimum, to get active coverage.
Most people only need a term life insurance policy, but some individuals with long-term dependents are better off with a whole life insurance policy. An agent or broker can guide you toward the right type of policy for your needs.
If you have dependents or anyone who would suffer financially if you died, life insurance offers important financial protection.
Nupur Gambhir is a life insurance editor at Policygenius in New York City. She has researched and written extensively about life insurance since 2019, with specialties in life insurance companies, policy types, and end-of-life planning. Her writing on insurance and finance has appeared on MSN, The Financial Gym, and end-of-life planning service Cake. Previously, she worked in marketing and business development for travel and tech.
Nupur has a B.A. in Economics from Ohio State University.
Amanda Shih is a life insurance editor at Policygenius in New York City. She has a passion for making complex topics relatable and understandable, and has been writing about insurance since 2017 with specialities in life insurance cost and policy types. She's previously written for Jetty and LegalZoom.
Amanda has a B.A. in literature and communication from New York University.
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