Life insurance can help ensure the financial stability and security for your dependents (i.e., beneficiaries), so they have the resources to replace your income after you die. But, how does one go about purchasing life insurance? Being able to understand the process of purchasing life insurance can guarantee that you are getting the right policy, which fits your needs and budget. Here is what to expect when buying life insurance.
The first step is to determine your policy and coverage, which is categorized into two groups – permanent life insurance (i.e., coverage for your entire life) and term life insurance (i.e., coverage for a set period of time).
From here, you will need to determine the amount of coverage you want – how much you want to leave your beneficiaries behind.
After having a basic understanding of your insurance needs, the next step is the written application. This is necessary whether you apply through an advisor or directly to the company.
In recent years, two new methods have been created to reduce the processing time of applying for life insurance, which can take several weeks under the traditional method.
The first method is called tele underwriting, which is where you are asked all the questions over the phone and then sign the application at a later time.
The second method is similar; with this method, the application is done over the Internet, additional questions are asked over the phone, and then the paperwork (including the application) are signed when the policy is delivered.
An application is a form with a series of questions that will range from your identification information (i.e., address, phone number, drivers license, etc.), to personal financial information, as well as medical questions and avocation questionnaires (where appropriate). Avocations are hobbies, such as rock climbing, scuba driving, etc.
Some insurance companies and policies will accept your medical information via the application, while others require a health exam.
In the case where a medical exam is required, a paramedical (i.e., licensed healthcare professional) will conduct a physical either at your home, work or at a licensed clinic.
Next, an underwriter at an insurance company will evaluate your application and medical history/exam to determine your financial risk to the company. From here, they will either approve or deny you for life insurance, which can take days or weeks to determine.
Steuer, author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, has more than 25 years of experience and holds the Department of Insurance Analyst License (LA) as well as the Charted Life Underwriter (CLU) designation. Tony holds various leadership positions and has authored three books on the topic of life insurance.
Steuer’s work has been awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy for his The Questions and Answers on Disability Insurance Workbook and The Questions and Answers on Insurance Planner. Forbes named Questions and Answers on Life Insurance: The Life Insurance Toolbook as one of their top nine great investment books.
He’s also the founder of the Insurance Literacy Institute and creator ofdesigned to empower consumers and to identify members of the Insurance Industry dedicated to strong professional standards.
Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit https://tonysteuer.com/ to join the GET READY! Financial Preparedness Club and access free resources.