What to Expect When You Apply for Life Insurance
Applying for Life Insurance?
We hope your livelihood is all well now, but the truth is a healthy livelihood isn’t guaranteed in the future. The burden of unexpected crises is part of life. You can get sick tomorrow, hurt next week, or pass on unexpectedly next year. Life insurance is something we use to put this uncertainty we face into a comfortable spot knowing our loved ones will be financially well off if something should happen to you. It’s also the one product we all should have but hope to never use.
When you apply for life insurance, there is a routine medical exam and checking of your current livelihood for anything the life insurance companies would want to know when crafting your policy. This is what’s done on the insurance company’s side. However, you have some preparation of your own to do. On your side, you should make a habit of knowing what insurance plan you are looking for and shopping around and comparing policies.
Step 1: Decide what your ideal policy looks like
There are two types of life insurance: Term and Permanent Insurance. Term life insurance is generally cheaper but only provides temporary coverage with less flexibility. You can read more about term life options here.
Permanent life insurance is more expensive but is designed to ensure you for your entire lifetime and accumulates cash value that you may be able to access later in life. Take the time to read up on permanent life insurance before you choose to purchase a permanent policy because it is a lasting investment.
After you decide on which type of coverage you would like to have, think about how much death benefit coverage you would like to have. It helps to calculate this number with some of these costs in mind: your funeral expenses, your mortgage, your children’s education, any payment plans you are on, a projection of future income, and general living expenses for a considerable time your family will need. If you aren’t confident in picking the right amount, start with your annual income. Then, multiply that number by how many years you would like your loved ones to be covered for. You can always talk to a financial advisor if you want help with your projections
Step 2: Shop around!
Life insurance is an important, lengthy commitment, and it takes a piece of your income to keep it going. Don’t overpay for it! All life insurance providers will feel differently about your needs and what it takes for them to accommodate you, and therefore will present different costs to you for their coverage. Some costs will be higher than others, and some companies will be unable to provide the coverage you want for your budget. This process may be easier for you and more streamlined if you get the help of an independent, licensed life insurance agent.
Step 3: Applying for the Policy
The application step is much like an in-depth questionnaire. Firstly, you will be asked about your basic information such as your name, date of birth, address, sex, height, and weight. Then some more sensitive information will be gathered, like your nicotine and alcohol use, hobbies, exercise habits, driver’s license number and social security number. This information will all help the insurance company determine how favorable you are to insure. They look at your medical history and your family’s medical conditions, your driving record, and even what behaviors you have that make you sickness or accident prone.
When you apply, you will also state your beneficiaries. These are the people your death benefit will go to if you were to pass away. Your insurance company may also want contingent beneficiaries at this time, who are the people who will receive your death benefit if your first beneficiaries are unable to receive the death benefit. Again, each company will ask different questions and may require unique medical testing.
Step 4: Medical Exam and Underwriting
The medical exam isn’t as much of a hassle as you think it is. It can often be done in your home by a visiting nurse, at a time that works for you, and at no cost to you. It won’t take long.
The results of this exam will directly impact your policy rate. Although last minute, healthy habits in the week before the exam, or earlier, may go a long way. Control your alcohol and nicotine consumption, eat healthily, and go for morning walks every morning. Show to the insurance company that you are a safe and favorable candidate for coverage.
The insurance company will take the medical exam’s result and your reported information in your application and go through a process called underwriting. This is the official measurement of how favorable you are to ensure and how your rates will be formed. Your questions about underwriting will be answered in this article.
Step 5: Getting the policy
You’ll have your policy usually within a couple of weeks of being approved. The policy will need to be approved on your end, signed, have the payment plan and source confirmed and sent back to the insurance company. You will be set and insured as soon as your first payment is processed. There’s typically a 30 day grace period where you can cancel or alter your plan
- Know what your ideal policy looks like
- Shop around
- Prepare for the medical exam
- Be honest with your application and life insurance agent