How to Buy Life Insurance
Quick Facts
Life insurance applications are lengthier than auto or home insurance applications, as most companies require a medical exam
There are several types of life insurance policies, such as term life insurance or permanent life insurance
If you don’t get approved for life insurance, you can buy a more expensive policy that doesn’t require a medical exam
Buying life insurance is more time-consuming than purchasing a home or auto insurance policy, as it’s usually a bigger purchase. So when applying for life insurance, it’s important to ensure you’re getting the right policy for your needs and following all application steps correctly. It’s also helpful to familiarize yourself with life insurance terms before shopping for policies — like “riders” or “flat extras” — so you know what you’re buying.
To guide you through picking the right life insurance policy and the application process, we’ll go through everything from picking a company to what age you should buy a life insurance policy. Continue reading to learn all the ins and outs of how to shop for life insurance.
How to Buy Life Insurance
At first, life insurance may seem confusing when shopping around and researching how to obtain it. It may initially seem overwhelming with all the different types of life insurance and the lengthy application process. In most cases, you’ll have to speak to an agent to purchase a life insurance policy, complete a brief phone interview, and undergo a basic medical exam.
Below, you can read through all the important steps you should take when buying a life insurance policy.
Determine How Much Life Insurance Coverage You Need
People buy a life insurance policy mainly to support their dependents after they pass away. Therefore, one of the most important steps to getting life insurance is figuring out how much of a payout you’ll need.
To determine how big of a death benefit payout you’ll need for your dependents, consider your annual income and any future major financial costs your dependents might have.
For example, you may want a large enough payout to cover your children’s college tuition, your mortgage, debts, and any other major costs that would burden your beneficiaries. You’ll also want a payout to replace your annual income and support your dependents for several years if they aren’t adults yet.
Finally, you’ll also want to consider any funeral costs. If your beneficiaries would struggle to afford your funeral costs, add funeral costs to your coverage calculations.
If you need help calculating how much life insurance you need, there are plenty of free online tools you can use to see how much money your dependents would need. They help ensure you don’t forget about any additional costs that might come up for your beneficiaries.
Choose The Best Type of Life Insurance Policy for You
While calculating the coverage amount you need is critical, you’ll also need to research which type of life insurance policy is best for you. The two life insurance types are permanent and term.
Permanent life insurance lasts for the policyholder’s entire life if they maintain payments. On the other hand, all types of term life insurance last for a fixed period.
There are a few variations under the permanent and term life insurance categories, such as whole or universal life insurance policies. Look at the basics of these different types of life insurance below.
Term Life Insurance
Term life insurance is generally the cheapest option of all life insurance policies, as term life insurance coverage doesn’t last indefinitely like permanent life insurance. Instead, term life insurance lasts for the term you pick, such as 10 or 30 years. If you pass away during the term life insurance period of coverage, your beneficiaries will receive the term life insurance payout.
However, if the term period ends while you’re still alive, you won’t get any benefits or payouts unless you paid extra to get part of your premiums returned. You may also have the option to renew your term life insurance policy again for another period or convert it into a permanent life insurance policy.
Term life insurance can be a useful option if you need temporary coverage at a cheaper price. For example, suppose you want extra financial protection while paying off a mortgage or sending your children to college. In that case, consider term life insurance until your major financial obligations get fulfilled.
Visit our term life insurance buying guide for more information.
Universal Life Insurance
Universal life insurance is a form of permanent life insurance. With universal life insurance, the policy has a cash component that gains interest and helps you accumulate cash value. This cash value is on top of your death benefit payout, so it can be useful if you want to withdraw money from the policy.
You can also sometimes use the cash component of universal life insurance to pay your life insurance rates for a while or decrease your death benefit payout if you need to save money temporarily. So if you want extra flexibility with your life insurance policy, consider looking into a universal life insurance policy.
Whole Life Insurance
Whole life insurance is another type of permanent life insurance similar to universal life insurance. Like universal life insurance, it has cash value in addition to the death benefit payout. However, it also has fixed premiums, meaning your life insurance rates stay the same throughout your life — this is great if you lock in rates at a young age.
However, whole life insurance is more expensive, as premiums are fixed along with the death benefit. Since universal life insurance adjusts rates and cash value depending on if you withdraw money, whole life offers greater security to customers than universal life.
If you want more tips on choosing between different types of policies, visit our guide to term vs. whole life insurance.
Look Into Life Insurance Companies
Once you’ve decided what coverage you need and the life insurance policy you want, your next step is to find a life insurance company. You should consider a few things when shopping for life insurance:
Check companies’ coverages. If you know what type of life insurance you want, look for companies offering that life insurance. Not all life insurance companies offer specific types of life insurance that are less common.
Check companies’ financial ratings. You want to ensure your chosen company won’t go bankrupt and not pay out your death benefit to your beneficiaries. Check the company’s financial ratings on trustworthy sites.
Check companies’ customer ratings. In addition to financial ratings, you should also check what customers say about the company’s customer service and overall satisfaction with the company.
Since a life insurance company is a company you trust to handle the death benefits payouts to take care of your dependents after you pass, it’s important to pick a life insurance company you’re happy with.
Get Life Insurance Quotes
Once you have a list of the best life insurance companies, the next step is to get quotes from some of the companies you’re considering. In most cases, you can get a free quote directly from the life insurance company’s website. Getting quotes from multiple companies will help you determine which has the most affordable rates.
Generally, you’ll need to provide basic information to get life insurance quotes. For example, you’ll need to provide personal information like your name, address, and gender.
The quote will also ask basic questions about your medical history, like if you smoke or have had major surgeries. You don’t have to provide detailed medical history at this point to get the quote, as quotes are just a basic price analysis to estimate what you might pay.
If the rates are out of your budget, get multiple quotes to see if you can find anything cheaper. You may also have to reconsider the coverage level or type of life insurance you initially wanted. However, any protection you can provide to your beneficiaries is better than none.
Fill Out Life Insurance Application
Once you’ve compared life insurance companies’ costs and ratings, the next step is to fill out an application with your chosen life insurance company.
You can usually fill out a life insurance application online, and you’ll need to supply more in-depth information than you did for your quote. For instance, you’ll need to give a more detailed medical history and your Social Security number.
Complete Life Insurance Phone Interview
Once you’ve submitted your life insurance application, the life insurance company you applied for may want you to complete a phone interview. These short phone interviews allow the company to confirm the information submitted on your application and learn additional details about your lifestyle.
For example, they may ask if you have any dangerous hobbies, such as rock climbing, and other relative questions.
Complete Life Insurance Medical Exam
Most life insurance companies require you to complete a medical exam before being approved for coverage. Life insurance companies usually send a medical examiner to your home to take your vitals, like blood pressure, weight, and height. These exams are usually short and gauge your overall health.
Remember that if you need to take a medical exam for approval, the process will take a few weeks longer than a guaranteed universal life insurance policy, which isn’t dependent on your health. However, if you’re in good health, a medical exam ensures you receive low life insurance rates.
Insurance Company Will Approve or Deny Application
Once you’ve completed all the steps for a life insurance application, the only thing you can do is wait to hear back from the insurance company. The life insurance company will review the information you provided during the application process and your medical exam results.
Then, the life insurance company will approve or deny you coverage. Generally, people get denied if they have serious health issues like cancer or heart disease or are older than 80. You can explore other life insurance options like no-exam life insurance or burial insurance if you get denied.
If approved, the life insurance company will send you a final quote and all the life insurance documents to sign. You’ll then make your first payment and decide if you want to pay a monthly or annual rate. Once all the life insurance policy documents are signed and you’ve paid, your life insurance policy will go into effect.
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Why should I buy life insurance when I’m young?
We recommend buying life insurance young because you can get much cheaper life insurance rates. On the other hand, older customers often have health problems like heart disease or diabetes that can raise their life insurance rates. So, most younger customers can often lock in a lower rate if they’re relatively healthy.
In addition, while younger customers may want to put off buying life insurance due to other expenses like mortgages and school debt, it’s smart to get life insurance if younger customers have dependents. That way, younger customers’ beneficiaries won’t struggle with financial issues after an unexpected death.
Should you buy life insurance when young and single?
If you don’t have any life insurance beneficiaries, such as a partner or children, you may wonder if you should get life insurance.
Remember that you don’t have to leave your death benefit payout to a person. You may also leave your money to a charity of your choice, or you can use it to pay off debts and leave the remainder to a close relative, such as a parent.
In addition, if you’re an owner or co-owner of a business, you could leave your benefit to the business if it would struggle financially after your death. This benefit ensures the business won’t go under if you pass away unexpectedly.
So, we recommend you buy life insurance while young and single. It can be useful to lock in a cheaper rate, especially because you may have a partner or children you wish to provide for in the future after your death.
Buying Life Insurance When You Have a Baby
If you’re having a baby, there are a few different types of life insurance you can choose. For example, you can choose a term life insurance policy that lasts until all your major financial obligations end, such as sending your child to college or paying off your mortgage.
You can also choose a permanent life insurance policy that lasts for the duration of your life.
When you choose the coverage amount — also known as the death benefit payout or cash component — ensure it’s enough to provide for your child for however long they need. So, it should be enough to pay off debts, replace your income, and provide for major costs like college.
When should you buy life insurance for your child?
Life insurance buyers can usually buy life insurance for children within the first month of birth. It’s often sold as a rider to your life insurance policy and offers a small payout to cover funeral expenses and remaining medical bills.
Sometimes, there’s the option to turn the life insurance policy over to your child when they turn 18, so they can get low rates and have life insurance from a young age.
When should I purchase term life insurance?
Term life insurance is a great option if you only want coverage for a specific period. It’s often cheaper to buy it at a young age, as it doesn’t cover you for your entire life. However, you can sometimes convert your term life policy to a permanent life policy at the end of your term.
You may want term life insurance if you have a mortgage or debts you don’t want your spouse to be stuck with after your death. You may also want it to ensure your children’s college gets paid for after an unexpected death.
When should I buy permanent life insurance?
As we mentioned earlier, it’s always best to buy a life insurance policy when you’re younger, as the rates are almost always cheaper than if you buy a life insurance policy after retirement. In addition, if you choose a life insurance policy with cash value, it’s tax-deferred, and you could use that money throughout your life for extra financial backup.
Therefore, the earlier you buy a permanent life insurance policy, the more money you can accumulate. Also, you can lock in a cheaper rate when you buy a permanent life insurance policy while younger and healthier.
Why do prices increase when you wait to buy life insurance?
Your quoted rates will increase if you wait to buy a permanent life insurance policy. For example, the rates for a 40-year-old are almost twice those for a 20-year-old.
The older you are, the more likely you’ll develop serious health issues that could contribute to higher life insurance rates or coverage denial. Life insurance companies are also more willing to offer cheaper rates to younger customers, as the likelihood of them paying out a death benefit early in the policy is much lower than an older customer.
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The Final Word on How to Purchase Life Insurance
The first step to purchasing a life insurance policy is deciding what type you want and how much coverage you need to take care of your beneficiaries.
You’ll also need to research companies offering your desired coverages and get plenty of quotes. Finally, once you’re ready to buy a life insurance policy, you’ll have to fill out the application and wait for approval.
If you’re ready to start shopping around for life insurance rates, compare companies to ensure you get the best deal. Then, use our free rate comparison tool to find your area’s best life insurance rates.
Frequently Asked Questions
When should you buy term life insurance?
You should consider buying term life insurance if you have major financial obligations that would burden others after your death and you don’t want to pay for a permanent life insurance policy. Some examples would be as follows:
You have dependents, such as children, that depend upon your income.
You share a mortgage with a significant other who would struggle financially if they had to pay it off themselves.
You have significant credit card debt or student loans to pay off.
If other people depend on your income, getting a term life insurance policy to protect your loved ones is worth it.
What should you consider when buying life insurance?
Some of the things you should consider when buying a life insurance policy are as follows:
Decide how long you want the life insurance coverage to last. If you want coverage for a short period, get term life insurance instead of permanent life insurance.
Decide how much coverage you want. Consider how much money your beneficiaries would need to offset the loss of your income.
Decide who you want your beneficiaries to be. You can have one beneficiary, or you can have multiple beneficiaries.
Researching these aspects will ensure you pick the right coverage and policy for your needs.
What should you consider before buying life insurance?
Though you should consider your coverage needs, determine whether you can afford life insurance premiums. Your monthly costs will increase regardless of the life insurance type you choose.
While it’s cheaper to buy life insurance at a young age, you should hold off until you’re in a better financial position if it’s too much of a strain on your budget.
What age should you buy life insurance?
Generally, most people should consider purchasing life insurance in their 30s. Rates are cheaper at this age than if people wait until they’re older to buy a life insurance policy. Of course, if you can’t purchase life insurance in your 30s, you can wait a decade or two to purchase life insurance.
Can anyone get a life insurance policy?
Yes, in most cases, most people can get life insurance. However, people with serious illnesses or those older than 80 may have trouble finding a life insurance company willing to insure them.
So, we recommend getting life insurance before you develop a serious illness or become too old to get a cheap rate on life insurance.
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states.
After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in…
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Written by
Rachael Brennan
Licensed Insurance Agent
Benjamin Carr was a licensed insurance agent in Georgia and has two years’ experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.
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Reviewed by
Benji Carr
Former Licensed Life Insurance Agent
