Buying life insurance is a once or twice in a lifetime event. If you have never purchased a life insurance policy before, you may not be familiar with the steps involved in doing so. While there is no set process to follow, the following are the seven steps most consumers typically go through to purchase a life insurance policy:
- Find an Insurance Agent
An insurance agent is like, for example, a customer assistant at a technology store like BestBuy – they both help you understand the product you are looking to buy, and select the right one for your needs without any additional cost to you for their service. Whether you buy your insurance policy directly from the insurance company or use the knowledge and expertise of an insurance agent for the same, your cost for that insurance policy will be the same.
- Determine Your Needs
Work with your insurance agent to determine whether life insurance is warranted for your situation. If warranted, your agent will help you decide the type and the amount of insurance ideal for your situation. Your agent will help you customize your coverage with policy options and riders to meet your needs, and assist you in preparing your insurance application.
- Get Quotes
Your insurance agent will need your basic information to get preliminary quotes from multiple insurance companies without disclosing your identity to them. When comparing quotes from various companies, remember that the cheapest coverage isn’t always the best option. Focus on the quotes that are in your price range, and let your insurance agent explain the pros and cons of each choice. Once you select an insurance company, fill out their insurance application to apply for the insurance coverage.
- Fill Out the Application
You will need to complete an insurance application to purchase life insurance. An application can be a paper application or electronic application using secure websites, email, and phone calls. The application will ask about your age, height, weight, lifestyle habits (i.e., smoking, drinking, exercise), driving record, hobbies, health-related questions, financial information including your annual income and net worth, etc. Normally, your medical exam is also scheduled as part of submitting your application.
- Get a Medical Exam
Most companies require an in-person medical exam. Your insurance agent will arrange your medical exam, at no cost to you, at your home, office, or a clinic selected by the insurance company. During the exam, the paramedical will likely take your blood and urine samples, blood pressure, height/weight measurement, and medical history. The paramedical will likely ask about lifestyle habits that could affect your health (exercise, smoking, drinking, high-risk hobbies, etc.) and to sign request forms for your medical records. Life insurance medical exams normally take no longer than 30 minutes. - Get Approval
An underwriter at the insurance company will review your application and medical exam results to determine what financial risk you represent to the company, and whether to approve your request for the coverage. If approved, you will get the final quote from the insurance company, which may be different than the original quote, if the facts collected during the underwriting process are different than the information you originally provided to get the quote. You may adjust your policy amount, term, and/or riders, to finalize the quote. The approval process usually takes between 2 to 6 weeks.
- Pay Your Life Insurance Premium
Once your insurance application is approved and premium is finalized, the insurance company will send you your life insurance policy and information to make payment. At this point you will also sign off on a few other documents such as delivery receipt, amendments, and health statement. It’s important that you immediately and carefully review the policy and discuss any questions you have with your agent. Once you make your first payment, you are insured.
By law, every life insurance policy includes a 30 day “free look period”. This gives you the right to deny the insurance coverage within 30 days after you receive the policy. If you decide to turn down the coverage during the free look period, the insurance company is required to refund you the full amount of any payments you have already made.
