Shopping around for different life insurance policies is now easier than it has ever been, for better or for worse. Online applications and price quotations are offered by the majority of the major insurance companies; many of these applications do not require a medical exam. However, before you make a purchase, you should educate yourself on the numerous types of coverage that are available on the market as well as how much protection you require. You should also be ready to check the rates offered by a number of different insurers and compare those rates to one another to ensure that you are getting the finest bargain possible.
Checklist for the Purchase of Life Insurance
- Get familiar with your choices.
- Consider how much protection you absolutely require.
- You have the option of purchasing coverage that is either term (short-term), permanent (long-term), or both.
- Get and compare quotes.
- Put in an application for the insurance policy (or policies, if you're getting more than one) that meets your requirements the best.
Permanent vs. TermLife insurance policies can be broken down into two primary categories: term and permanent.
Insurance Coverage on a Term BasisThe most fundamental type of life insurance is known as term life insurance. A death benefit, often known as a cash payout upon death, is offered to the individual who is insured for a predetermined amount of time, typically anywhere from one to thirty years. There are certain businesses that provide terms of up to 40 years. For example, if you had a policy with a term of 10 years and a face value of $250,000 and you passed away during the first 10 years of the policy, the person you named as your beneficiary would be eligible to receive the $250,000 death benefit. When the term of your term life insurance policy comes to an end (even if the covered individual is still alive), you will not receive any of your premiums back. Some term insurance policies come with a "return of premium" feature, which allows you to get some or all of your premiums back. However, these policies are more expensive. The majority of businesses that sell term life insurance will only sell new policies up to a particular age, typically between the ages of 70 and 80, but this can vary depending on the length of the policy and your current state of health. If you are seeking a 35- or 40-year term, the maximum could be significantly lower, somewhere around the age of 55.
Permanent Life InsurancePermanent life insurance policies are intended to provide coverage to the policyholder from the time the policy is purchased until the policyholder passes away. Permanent life insurance policies, as opposed to term life insurance, accumulate a cash value over the course of their existence. This cash value can then be used as collateral for loans or withdrawn directly. You pay a greater premium each month in order to build up that cash value, which helps balance the cost of insurance as you get older, which is why permanent life insurance policies are more expensive than term life insurance policies. There are many different kinds of permanent life insurance policies available on the market today: Traditional whole life:Cash values are stated in the policy contract for traditional whole life insurance plans. They construct based on a predetermined interest rate that is fixed and established by the insurer. The premiums for whole life insurance are also predetermined and fixed according to a predetermined schedule. Your regular payment could increase up or down throughout the course of the contract, but the details will always be the same. It also means that if you do not pay the amount that is stipulated in the schedule on a monthly basis, your insurance policy may become invalid. Universal life: This type of life insurance contributes interest to the cash account based on the rates that are available on the market at the time. To put it another way, monetary values are not established in advance prior to the signing of the contract. If there is sufficient cash value to meet the premiums, the premiums for these policies can be adjusted freely (both in terms of quantity and frequency). Variable life: Variable life insurance is characterized by the fact that it accumulates cash value by way of stock market investments in accounts selected by the policyholder. They frequently take the form of mutual funds. In the event that investments experience a decline in value, you may be required to pay more premiums in order to maintain coverage under the policy. If you have a whole life insurance policy, you probably won't be able to modify the death benefit, but if you have a universal or variable life insurance policy, you might be able to.
Determine the Types of Coverage You RequireMake sure you have the following information before beginning your search for a specific life insurance policy:
- How much protection do you desire?
- How long you need to be covered for is important.
- Which flavor of insurance do you have your heart set on getting?
Examine Both the Coverage and the RatesThe next thing to do is to contrast the various quotes. If you want to compare prices from a variety of insurers all at once, it is recommended that you use an online brokerage. You could also visit the websites of several other insurers, which is something you will most likely have to do if you want to compare prices for permanent coverage. Evaluate each of the quotes very carefully. You should look further than the premiums offered to make sure that the insurance covers the things you need to be covered. For instance, you could be interested in purchasing a term life insurance policy that can be changed into permanent coverage at any time without the need to give evidence of your continued insurability. ("Insurability" is just another way of expressing how much risk a corporation takes on if it accepts you as a client; the lower the risk you offer, the more "insurable" you are.) You could also choose one that allows you to renew it after the term is up without having to provide any proof that you are still able to be insured. Because it could be decades between the time you buy a policy and the time you cash it in or receive a payout, the financial strength of a corporation is very crucial to consider. It should be able to withstand repeated use. You may do your own study on this information thanks to the abundance of resources available to you online, such as the AM Best rating service. When compared to getting term life insurance, purchasing permanent life insurance typically involves a higher level of investigation. Permanent insurance policies may include what are known as "living benefits," which may include reimbursement for the cost of long-term care or early access to the death benefit in the event of disability, terminal disease, or chronic sickness. These aspects can be very different from one policy to the next. You also stand to lose more money if you purchase permanent coverage and then change your mind about keeping it in the future because the associated premium payments are higher with permanent policies. However, there is a catch: if the policy you select generates a cash value over time, you may be able to get a portion of that cash value back if you surrender the policy before it matures and becomes fully paid out. Permanent policies almost always have a "surrender period" (which can last up to 20 years), during which you will be assessed a surrender charge on any withdrawals from the cash value, including a full surrender of the policy. This charge applies even if you cancel the policy entirely during the "surrender period." During the first few years of the coverage, your payments could be significantly higher. New life insurance policies come with a "free look" period, during which policyholders have the opportunity to cancel their coverage and receive a refund of any premiums paid. It might be anything between ten and thirty days. Ask the insurance company how long the coverage you're considering will cover you for. Ask questions, and make sure you read the fine print before you apply for any policy if you are confused about the specific features that it includes.
Pick the Plan That Best Fits YouWhen you evaluate the several quotations, you should be able to determine which policy (or policies, if you're purchasing more than one with different lengths) is the best fit for you. You might apply for more insurance plans than you actually require in order to determine which provider offers the best rate; however, doing so is usually not a wise idea. The majority of the time, the Medical Information Bureau will keep a record of every application for life insurance that a person submits (MIB). Every insurance company to whom you apply will be able to view your other submissions to other companies. That could be a problem due to the fact that there is a limit on your insurability, which refers to the total amount of death benefit coverage that you are qualified to receive across all of the policies that you now have (or might own). Your salary and any other relevant financial information will determine your limit. If you apply for coverage that is greater than your insurability limit, there is a possibility that your entire application will be rejected.
Prepare YourselfDuring the application process for life insurance, whether you do it online or through a broker, you will be required to input specific information, including the following: Your own medical history, as well as the health histories of your parents and siblings Information on how to get in touch with your primary care physician Your degree of income and debt, respectively. The details of your beneficiaries, including their names, addresses, and Social Security numbers. Following the submission of your application for life insurance, the insurance company may request that you undergo a paramedical examination in order to assess whether or not you are eligible for coverage. The examination frequently requires the patient to provide samples of both their blood and urine. In certain circumstances, such as if you are at least 50 years old or if you are applying for a substantial quantity of coverage, it may even involve electrocardiograms and treadmill stress tests. Your blood and urine will be tested in a laboratory to look for harmful chemicals and health conditions such as excessive blood sugar levels or abnormal liver function. These tests will also look for substances like cocaine or nicotine. The findings of the laboratory will be sent to the underwriting department of the insurance company. This department is the one that will decide whether or not you are eligible for life insurance and, if so, at what premium. The price of life insurance goes up when you get older and have more health problems.
Purchasing Life Insurance Via the InternetA physical examination is not something that everybody wants to do. However, if you apply for a policy online with an insurer that employs expedited underwriting, you may be able to qualify for a policy without having to do a medical exam, and you may still be able to get a good rate. This is only the case if you register for a policy with that particular insurer. This sort of underwriting is based on medical data provided by a third party in addition to the in-depth information you provide about your medical history and how you utilize prescription drugs. There are a number of large insurance companies that provide term life insurance policies to qualified applicants that do not require them to undergo a medical exam. Be aware that some no-exam policies may restrict the amount of coverage you can purchase, in addition to perhaps charging higher premiums. When applying for life insurance, the more information you are required to offer, the cheaper your potential premium will be. This is due to the fact that the best risk classes are frequently only made available to applicants who are willing to submit to more thorough underwriting.
- Permanent insurance is more expensive than term insurance, but it accumulates a cash value and offers coverage for your entire life. Term insurance is less expensive.
- Know how much coverage you need and what kind of policy you want before you start shopping for quotes.
- A free look period is often anything from 10 to 30 days long and is included in insurance contracts. During this time, policyholders have the ability to cancel their coverage and receive a refund of any money made.
- When you apply for life insurance, the more information you submit, the potential there is for your premium to be reduced, and vice versa.