Life insurance, along with disability insurance, is foundational for proper financial planning. Life insurance protects your family from financial disaster should an unexpected death occur. A “term” life insurance policy is quite simple—you are insured for a certain term, usually 20 or 30 years. During this term, you pay a premium every month to maintain insurance. If you pass away during the term, your beneficiary receives the death benefit. This is tax-free and can be used by your beneficiary for things like replacing your lost income, paying off debt, or paying for your kids’ future college expenses.
Obtaining life insurance is simple and can be done in three easy steps:
1. Contact an insurance broker.
Usually, life insurance is sold through an insurance agent. An agent might represent a single company; therefore, you would see quotes from only one company. A better approach is to work with an insurance broker. This means you can see quotes from multiple companies and can choose the best policy for your situation. After you decide how much insurance to get, your broker will start an application for you with the appropriate life insurance company. This begins the process known as underwriting.
2. Take part in the underwriting process.
Insurers need to evaluate your health before they insure your life. Often, as part of the underwriting process, you will be asked to do a paramedical exam. This is a short health exam done by a third-party health examiner. It does not cost you anything and can be performed at your home or workplace. The examiner will measure your height, weight, and blood pressure. You may also be asked to give a blood and urine sample. The insurance company might also request medical records to better understand your recent doctor’s visits. Though it sounds like a lot of work, your broker will make the process as convenient as possible.
3. Review the offer.
The price of your life insurance is directly connected to the risk the company will take when insuring you. If your insurance is cheaper than you were quoted, you are most likely in better health than you thought. If you have health issues or family history of certain diseases, you are considered a higher risk and would likely have to pay more for life insurance. Once the offer is given, you have the chance to accept or decline it. If you accept, you receive a life insurance contract and pay your first month of premium and are officially insured.
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