Maybe you just had a baby and want to make sure she’s protected if something were to happen to you. Or perhaps you recently bought your dream home and don’t want your spouse to ever be unable to make the mortgage payments.
Whatever the reason motivating you to apply for life insurance, you’re probably wondering what to expect as you start the process. The steps you follow can vary depending on several factors, but in general, here’s what you’ll have to do.
DETERMINE WHAT YOU REALLY NEED
The first step to getting insurance is figuring out not only how much of a death benefit you’ll need, but also which type of policy is best for you.
Let’s start with how much. A common rule of thumb is 10 times your salary. But that’s just a starting point, and every situation is different. Typically you’ll want enough to cover whatever it is you’re trying to replace, whether that’s mortgage debt or lost income. You may also need more than you originally anticipated if you want a death benefit large enough to cover big future expenses like your child’s college or wedding.
Once you’ve come up with a ballpark, you’ll have to figure out what type of policy you want. There are two main types of insurance: Permanent life Insurance covers you for your whole life and builds cash value; term life insurance covers you for a set number of years.
PRICE OUT YOUR OPTIONS
Whether you’re working with an advisor or getting coverage online, you can request a quote for how much the policy you want may cost, based on your age, health and other risk factors. Generally, premiums for term life insurance will be cheaper than for permanent, as a term policy covers you for a temporary period. However, if you request a quote for a permanent life insurance policy, it can also show you an estimate of how your cash value and death benefit could grow over time.
FILL OUT THE APPLICATION
Once you know which type of policy you want, how much death benefit you’ll need (often people get a mix of different insurance policies, perhaps some permanent and some term), and have received your quotes, you can formally apply for coverage.
On the application, you’ll be asked for some basic information about yourself, such as your name, address, Social Security number and employer. You’ll also need to identify who will pay for the policy (the owner or payer), the person whose life is being insured (the insured) and who gets paid if the insured dies (the beneficiary). In many cases, the owner and the insured or the owner and the beneficiary can be the same person.
Typically, you’ll also be asked for details on your financial information, health issues and other risk factors, like whether you smoke, drink, use recreational drugs or participate in extreme sports. The insurance company may also ask about your driving record, whether you’ve been denied insurance in the past and whether you have any other insurance.
Some questions may feel intrusive, but it’s important to be honest — otherwise, if it’s later discovered that you weren’t, your policy could be cancelled or your beneficiary’s claim could be denied down the line.
GET A HEALTH EXAM
You don’t always need to get a health exam to get life insurance, but depending on the type of policy you get and how much insurance you want, it may be a necessary step.
The exam usually takes 30 minutes to an hour. In many cases, it can happen in your own home or where you work. The person administering the exam will check your height and weight, listen to your heart, take your blood pressure, get a urine or saliva sample and ask about your lifestyle habits, personal medical history and family medical history.
Depending on your age and the amount of coverage you want, you might also be required to undergo a blood test, an EKG or other additional tests.
SHARE YOUR MEDICAL RECORDS
You don’t have to do much here except authorize the insurance company to get medical records from your doctor. Once you’ve done that, the insurance company will typically take it from there. Medical records are important because they help the company get better insight into your overall health history.
GO THROUGH THE UNDERWRITING PROCESS
Once the insurance company has your application and other information, an underwriter will review your information. In some cases, the underwriter is a computer. However, most of the time a real person will review your information to make a decision on whether to insure you. If the underwriter decides to offer you insurance, he or she will then determine how much risk you pose based on factors like your age, health and any risky behavior you may engage in. That risk assessment will dictate how much you pay for your coverage.
RECEIVE THE COVERAGE OFFER
Finally, you’ll get an offer that will include how much you’ll be charged for the amount of coverage you want. If you’re working with an advisor, he or she will explain the offer and can help you make changes if the cost differs more than you expected from the estimate. You could, for instance, decide on a different coverage amount or change the type of policy you have, such as going from permanent insurance to a term policy, or vice versa.
If you prepaid for your policy, your coverage will start right away. If you haven’t, typically your coverage will start after your first payment.
How long the entire process takes depends on the type of coverage you apply for. If you’re applying for a low amount of simple coverage, it can take a relatively short amount of time. If you’re applying for a larger amount of coverage with a more complicated policy, it may take longer, perhaps a month or more. What’s important is knowing that you’re buying the right type of policy that will cover your needs — and help give you and your family peace of mind.
Some questions may feel intrusive, but it’s important to be honest — otherwise, your policy could be cancelled or your beneficiary’s claim could be denied.