The Basics of Life Insurance – Step by Step

Step 1 – Do Your Shopping

The first step in the life insurance application process is to make sure that you actually apply with the right company. Do your shopping with all the companies on the market, review which product is right for you and request or run your own quotes. You want to make sure to compare rates with multiple carriers to avoid overpaying for coverage. Something to keep in mind: If you’re in other than ideal health, or have a high risk hobby or occupation, than the company with the lowest rate on the quote engine isn’t the lowest rate for you.  Each company will weigh certain risks differently so while Company A may come in at a lower healthy rate, Company B may have the lowest rate for your specific situation. If you’re wondering “how do I know which company?” That’s where we can help!

Step 2 – The Application

After you found a company that’s the perfect fit it’s time to apply. The application process can take 20 to 30 minutes and ask you a variety of questions. First your basic information will be collected like name, date of birth, and address. You will be asked for sensitive information like driver’s license number and social security number. This is asked so that the life insurance company can access your driving records and medical history. You will also be asked about your health and family history.  The application process can be done in person, on the phone with your agent, or even on the phone with the company directly.  It all depends on the carrier and the application process you have chosen.

When doing the application you want to make sure you know who will receive the money if you were to pass. These are known as your beneficiaries. Most of the time you will need to know their ssn so that the life insurance company can confirm their identity in the event of your death. It’s also wise to set up your contingent beneficiaries. This is basically a backup in case something happens to your beneficiaries at the same time as you. For example, let’s say your spouse is your beneficiary, if you both pass away at the same time, you would still want your kids to receive the money, so you would make them the contingent beneficiaries on the policy.

Once you answer all the questions it will be time to schedule the medical exam.

Step 3 – The Medical Exam

Most people want to avoid the medical exam because of the hassle but it’s really not a big deal. This exam will be scheduled at a time and place of your choosing at absolutely no cost to you, other than a few minutes of your time and a few drops of your blood. A qualified nurse will come out to your home and check your blood pressure, take a blood sample, a urine sample, check your height/weight, and ask you a few questions.

How you perform on this exam can directly influence your rate. Here a couple things you can do to provide the most favorable outcome.

  1. Eat clean a couple days before your exam.
  2. Stay clear of alcohol, strenuous exercise and caffeine to avoid a blood pressure spike.
  3. Schedule your exam in the morning. You’ll need to fast and you don’t want to go hungry all day.

This will all help to make sure you get a good reading the day of the exam, this can mean a difference between rate classes.

Step 4 – Underwriting

The life insurance underwriting process is the longest part of the life insurance application. This will take 4 to 8 weeks and will include an entire review of all your records. The company will look into the Medical Information Bureau(MIB) and pull up your medical history. If there is something that requires further clarification they will either reach out to you or request more records from your doctor. The underwriter will also review your driving history and lifestyle. Based on all these factors the life insurance company will make a decision on the type of rate you qualify for.

Step 5 – Policy Approval

Once you get approved for coverage you will receive the policy quickly. When the policy is in front of you, you’ll have to set up payment, sign it, and send it back. After the first payment comes out, you’re officially covered for life insurance. You will have a 30 day free look period to review the policy and if something isn’t to your liking you can change it or get your money back. So whether you paid monthly or annually you get your money back.

Helpful Tips

Throughout the process there a few things you can do to create the best outcome.

  1. Do your shopping! Learn about the product you are buying.
  2. Be honest with yourself and your agent on your application, this will only benefit you in the long term and short term.
  3. Ace the medical exam, it will directly influence your rate.
  4. If you’re a high risk, have your agent include a cover letter detailing your condition, the severity of it, and how you are treating it. This will increase your chances of getting the best rate class you can.

For the most part this is what you can expect when applying for a traditional life insurance policy. Sometimes the process can differ with different companies and product types. Some products like simplified and guaranteed issue plans offer options to bypass the medical exam so it can be a bit more expedited than the traditional medical exam option.