At first, thinking about how to get life insurance might seem overwhelming. If you’re not familiar with coverage types or how to buy life insurance policies, you might be tempted to put it off. Fortunately, Bankrate’s editorial team has done a lot of the legwork for you. We’ve put together a comprehensive guide for purchasing a life insurance policy and included valuable tips for selecting coverage amounts and saving on your premium.

How to buy a life insurance policy

Purchasing life insurance may seem complicated if you have never done it before. The first thing to know is that you can choose between permanent and term life insurance. Each comes with potential pros and cons, as well as a wide range of premiums.

Purchasing a life insurance policy has become easier as more insurance providers allow you to request quotes and buy a policy through their website. If you prefer to speak with a licensed agent, you can usually reach out over the phone or in person. Your insurance provider or agent will explain how to finalize your policy. For instance, you might have to get a medical exam, which must be completed in person.

If you are in the market for life insurance, here are the steps you may find helpful in purchasing a policy that is right for you.

1. Decide how much coverage you need

Before you start requesting life insurance quotes, determine how much coverage is right for you. Specifically, decide why you’re purchasing life insurance. For instance, you might take out a policy to financially support your dependents after your death, or you might get life insurance in order to provide a financial gift to loved ones or cover funeral expenses. If you’re a high-net-worth individual, you could use life insurance to cover estate taxes or business succession planning.

Deciding why you’re getting insurance will help you determine whether a term or permanent policy works best for you. For example, if your goal is to have financial security while you pay down a mortgage, you might take out a term that would allow your beneficiary to pay the loan off after your death. If you’d like to leave a legacy, you might take out a policy with a higher death benefit.

Here are just some of the reasons people need life insurance:

  • Financial support for dependents
  • End-of-life expenses
  • Funeral costs
  • Charitable contributions
  • Debt management
  • Income replacement
  • Business protection

Although there are many ways to calculate a potential coverage limit, one popular method is the DIME formula, which takes into account your debt and final expenses owed, total income based on what might be needed after your death, the amount left on your mortgage and any outstanding or expected expenses for your dependents’ education or schooling.

For a simpler method, you could take out a policy with a death benefit that equals 10 times your current income. However, this strategy doesn’t take your family’s living expenses into account. You might prefer to use an online coverage calculator that asks you to enter specifics like your expenses, mortgage or education costs to come up with a more accurate estimate. Some individuals prefer working directly with a financial advisor or Certified Financial Planner when determining their coverage needs.

2. Pick a life insurance policy type

There are two main types of life insurance: term and permanent. Within permanent insurance, the two primary types are whole life insurance and universal life insurance. Term life insurance is usually less expensive with fewer benefits, while permanent life insurance is typically more expensive as it offers more benefits. Here’s a closer look at what these policies cover and how they work:

  • Term life insurance: Term life insurance is generally the cheapest kind of life insurance. It provides coverage over a specific term period, usually between 10 and 30 years. If you pass away during the term, your beneficiaries will receive a payout from the insurance company. Once the term is over, the benefits end unless the policy is renewable or convertible, which is offered by many insurers. It is important to note your premium will likely increase if you choose to renew or convert.
  • Whole life insurance: Whole life insurance is a type of permanent life insurance that provides lifetime protection as long as you continue to pay the premium, with fixed premiums and cash value. With some whole life policies, policyholders have to pay their premium until they die, and other policies only require a premium for a certain number of years (although these premiums are much higher compared to the lifelong premiums).
  • Universal life insurance: Universal life is another type of permanent coverage. It also accumulates cash value, but the policy is flexible to allow you to change your death benefit and premium to fit your changing needs. There are several forms of universal life insurance, including variable universal life insurance and indexed universal life insurance.

Before you buy life insurance, you may want to do more research to find out which option will best meet your needs.

3. Research different life insurance carriers

Next, start looking for life insurance companies that appeal to you. Remember that no two companies are the same. When choosing a life insurance company, search the website and look at the policy options. The best life insurance company for you may offer a combination of coverage options that fit your insurance needs and a positive customer service experience.

You can get an idea of a company’s level of customer service by reviewing J.D. Power studies for life insurance. Check for a company’s financial strength by reviewing ratings from AM Best, S&P and Moody’s. You may also want to research and compare different life insurance riders, which are add-on coverage options that could give you a broader range of protection. To help you save time, consider working with an independent agent or broker. They can run quotes from several providers on your behalf.

4. Request and compare life insurance quotes

Once you have selected a handful of potential providers, you can get quotes from each company. This can be insightful, considering pricing can vary significantly amongst insurers. Generally, you’ll have to provide some personal information, like your name, address, age and gender, and you’ll most likely have to answer health history questions. For instance, you might have to say whether you’re a smoker, take medications, have had surgeries and answer questions about your lifestyle.

The insurance company then uses that information to calculate a life insurance rate for you. Bear in mind that this is just an estimate since the exact amount might change following a medical exam.

If you can’t get an instant quote on an insurance provider’s website, you might have to contact an agent for more information.

5. Fill out the application

After choosing the provider that fits your needs, the next step is to fill out an application. You will be required to include basic personal information, as well as your Social Security number and driver’s license number. Additionally, you might be asked by the insurance company or your agent to submit an Attending Physician Statement (APS), which helps the insurance company verify your medical history (this form will be provided to you). Some life insurance applications can be filled out online, and it is usually a quick process. However, you should be prepared and have your medical information available, including a medication list and details regarding any chronic or pre-existing conditions.

6. Prepare for your phone interview

After submitting an application, the insurance company might require a phone interview. The interview is mostly used to confirm the information you included on the application, but there may be some additional questions asked. For example, the interviewer may want to know more about your lifestyle and hobbies, your financial health, your income and any other life insurance policies you have. The interview is generally quick and will likely be scheduled shortly after submitting your physical application, if it’s required at all.

7. Schedule a life insurance medical exam

Many life insurance companies and policy types require applicants to get a physical exam before they can be approved for coverage. The life insurance medical exam is like a regular doctor appointment, but the insurance company’s medical examiner may be able to visit your home or office to see you. They will generally take your vitals, like weight and blood pressure, and draw blood. The exam usually takes about 30 minutes, and you may be able to schedule it during your phone interview.

Not all life insurance policies require a medical exam. If you meet certain requirements, you might be able to get approved for life insurance without a medical exam.

8. Wait for approval

When the application process is complete, your job is done. The insurance company’s underwriter will take the information gathered from your application, phone interview and medical exam to determine if you’re eligible for coverage and, if so, what your premium is. As there is so much information to review, the approval process may take several weeks.

If you get approved and are happy with the quoted premium, you will be sent the policy documents to sign and approve. If you aren’t satisfied with the quoted rate, you can work with your agent to adjust the policy. For instance, you might change the death benefit/coverage amount or term length.

Once you’ve purchased the policy, you typically have a free look period that lasts 10 to 30 days, depending on the insurer, to confirm that you’re pleased with the policy. If not, you can get a full refund of the paid premium.

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Other considerations when shopping for life insurance

When exploring options for life insurance, there are other important factors to keep in mind:

  • Riders: Life insurance companies typically offer riders, but the options can vary. When choosing a life insurer, it may be worth checking that it has riders that suit your needs, such as a return of premium rider or child term rider. If so, consider how adding riders impacts the premium and how that affects the coverage you’re able to afford.
  • Financial goals: How much of your income is contributed to the household? Beyond basic necessities, is this amount used to help make progress toward financial goals? Consider the impact your death could have on meeting these important milestones.
  • Employer-sponsored coverage: If you have group life insurance through your employer, you’ll want to consider if it’s sufficient to cover your family’s financial needs if you pass away. If not, you’ll likely need an additional form of coverage. Also, be mindful that employer-sponsored policies generally become inactive once employment ends.
  • Captive vs. independent agent/broker: A captive agent only works with one insurance provider, so if you’re hoping to get help finding the best rates for life insurance, you might choose to work with an independent agent or broker. An independent agent can request quotes from several insurers. However, take note that the majority of the largest insurers by market share, State Farm and Allstate, for example, offer their products only through their captive agents.

What are some common mistakes when buying life insurance?

In general, you’ll get the most affordable rates for life insurance the younger you are. People who wait too long to take out a policy might be frustrated to find that they pay more for life insurance than they would have if they took out the policy earlier.

Another common mistake is not assessing your needs before purchasing a policy. This might lead you to have more coverage than you need, in which case you’re paying a higher premium unnecessarily, or you might not have enough coverage to meet your and your family’s needs. For example, you may jump on a $250,000 10-year life insurance policy seeing how cheap the rate is, not considering the costs of raising children and the importance of protecting them through their most financially vulnerable years.

If your goal is to cover specific financial situations, like paying for funeral expenses or paying off a mortgage if you were to pass away suddenly, it might be a mistake to pay for more coverage than you need—in this case, permanent life insurance. Take the time to decide which type of insurance is right for you before committing to a life insurance policy.

Frequently asked questions

    • The younger you are, the lower your life insurance premium generally is, assuming you are in good health. Age is one of the strongest predictors of mortality, so the older you get, the more likely it is that you’ll pass away during the policy period and that the life insurance company will have to pay your death benefit. This is why rates typically get higher as you get older. However, not everyone needs life insurance, even at older ages, so consider reviewing your situation with a licensed life insurance agent.
    • The amount of life insurance you need depends on your goals for the policy. If you’re buying term life insurance to provide financial security to your partner as you pay down your mortgage, you might only need enough coverage to cover the principal of your loan. If you want to provide money to send children to college, replace your lost income for your family, or leave a financial gift to your loved ones or an organization, you might need more coverage. Using a life insurance calculator may help you determine how much coverage you need, but you might also want to review your situation with a licensed agent.
    • No single life insurance company will be the best for everyone. To find the right company for you, you could look at the customer reviews, financial strength and policy options each company offers. You might also benefit from getting multiple quotes to determine which company could offer the right product and riders at the cheapest price.