How to Buy Life Insurance? 5 Crucial Steps

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There’s not much we can do to prevent unexpected accidents from happening. But we can protect our family in case the unexpected does happen.

A life insurance policy enables your family to pay for the financial burden that comes after a family member’s untimely passing.

But the process of buying life insurance can be a stressful experience. That’s why we’ve provided 5 crucial steps to cut through the clutter and get you the right life insurance policy.

1. Learn the Lingo

The life insurance world is full of odd terms that you probably haven’t encountered before. Here are a few of the terms you’ll come across:

Premium

A premium is the amount you are expected to pay in exchange for life insurance coverage. Typically you pay premiums monthly or annually and prices vary depending on the amount of coverage.

Class

Your class refers to your level of health, which determines the overall cost of your policy, with healthier individuals generally seeing lower prices. Factors like smoking, health history and life-threatening behaviors are used to determine one’s class. Categories of class include preferred, super preferred, standard and substandard. A super preferred individual is the healthiest while substandard is the least healthy.

Beneficiary

A beneficiary is the person or persons who will receive a payout in the case of death. Beneficiaries can also include businesses, charities or trusts.

Term Life Insurance

Term life insurance, also known as pure life insurance, is the most common type of life insurance policy. Under term life, you are covered for a specified time period, usually 20 or 30 years. If the policyholder dies within that period of time, the beneficiary gets the payout.

Permanent Life Insurance

Permanent life insurance policies provide coverage for life rather than a set amount of time. Permanent plans include whole, variable and universal life insurance. These plans allow you to earn a return on your investment in different ways. While popular with some, permanent plans are less common than term plans.

2. Make a Choice

It’s easy to become overwhelmed with the dizzying range of life insurance choices. To make the best choice, you should first decide how much coverage you need.

First, add up your annual after-tax income and your assets. Next, you’ll want to consider the costs of raising children, including college tuition costs. Finally, tally up the total amount of debt you hold.

The total should give you a general idea of how much coverage you’ll need. Now you can match your policy with your coverage needs and compare prices.

3. Get a Quote

Once you’re figured out how much coverage you need, it’s time to compare prices. Policygenius is an easy online tool that lets you compare life insurance policies for free.

Enter personal information such as age, gender, location and medical history and you’ll be able to search from a huge list of policies. Be sure to compare as many policies as you can. They vary wildly in price and coverage offered, so it’s worth your time to shop around.

4. Apply

Applying for life insurance is relatively simple, but it requires some pieces of documentation. This includes:

  • Proof of citizenship, identity and age – You can use a driver’s license, birth certificate or a valid passport. Non-citizens can use a green card or an employment authorization card.
  • Proof of income – This includes pay stubs, tax returns or an earnings statement.
  • Proof of residency – Homeowners can provide a mortgage bill or property tax statement. Renters can provide a signed lease or rent receipt.

Once you’ve gathered your documents, it’s time to apply. The application will ask you for your social security and driver’s license numbers.

Next you will have to authorize your doctor to share your health records to the insurance company. This is known as the Attending Physician Statement (APS).

Some life insurance carriers request an additional phone interview to confirm your information. This call will likely cover questions concerning your medical and income history.

5. Get a Medical Exam

The last step involves getting a medical checkup. Insurance companies require an exam in order to get an accurate report on your health.

On exam day, a nurse takes measurements like height and weight, blood pressure and pulse. You’ll also be asked for a blood sample, while some companies request a urine sample as well.

The good news is that the exam is free and should only take a half hour. Once you’ve been examined, you just have to wait until the insurance company contacts you.

You can’t control the future, but you can get ahead of unexpected situations. Life insurance helps protect your family and gives you peace of mind, so there’s no reason to wait to get your life insured. These five crucial steps will help you easily find the right life insurance policy that works for you.