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How to Buy Life Insurance: Step-by-Step Guide

Updated: Jul 8, 2023

The reality, however, is that the vast majority of people need life insurance. Life insurance is necessary for anyone who has people depending on them. This could be loved ones, such as aging parents or a spouse or children. Or it could be a business partner.

Figuring out how to buy life insurance is important not just for people with loved ones counting on their income. It's also essential for a consumer to buy it if anyone relies on their services. For example, a stay-at-home parent offers valuable family support. If the parent passed, someone may need to be paid to provide care. Life insurance should be purchased to cover those costs.

At what age should you get life insurance?

Deciding when to buy life insurance coverage is tricky. It can depend on each person's individual situation. However, it is absolutely crucial for a person to buy life insurance as soon as anyone is depending on that individual. Often, people buy life insurance when they get married, buy a shared home with someone, or have a child.

In some cases, it makes sense to buy life insurance even before having dependents. This could be a good idea for someone who knows they will have someone who relies on them at some time in the future. For example, a person who is planning to get married and have children may want to buy life insurance when they are young -- even before they are married.

This could make sense when comparing life insurance rates by age. Premiums can be much cheaper if a policy is purchased at a young age. Figuring out how to buy life insurance ASAP could also enable people to get covered before developing pre-existing conditions. Pre-existing medical issues could otherwise disqualify them from buying a policy later or could make life insurance more expensive later.

How do you qualify for life insurance?

When figuring out how to get life insurance, it's important to know how to qualify for coverage. For most term and whole life policies, this involves:

  • Submitting an application for coverage

  • Answering medical questions

  • Undergoing a medical exam

Some insurers allow people to buy coverage without an exam, regardless of medical status. These types of policies are called guaranteed issue. They usually don't provide much coverage. And there may be rules limiting when the death benefit is paid out. For example, some guaranteed issue policies have a long waiting period before beneficiaries can receive the full amount.

When deciding how to get life insurance, it's important to research all coverage options to find the policy that's the best fit.

Decide how much life insurance you need

Figuring out how much life insurance to purchase is one of the more complicated parts of determining how to buy life insurance.

Some experts recommend simply buying coverage equaling 10 to 12 times annual earnings. However, consumers can also use the DIME formula to get a more accurate estimate of how much coverage is needed. Here are the factors considered in the DIME formula that can be helpful when determining how to get life insurance.

  • Debt: Individuals determining how to get life insurance may want to buy sufficient coverage to repay their debt in full. This would mean loved ones aren't left struggling to repay debt that was taken out jointly.

  • Income: Life insurance serves as a replacement of the income the deceased person was earning. It helps ensure those dependent on that income don't face financial shortfalls. Consumers determining how to buy life insurance should determine how many years of income replacement they'll need. They can then buy coverage that provides it.

  • Mortgage: Many people looking into how to get life insurance will have a mortgage on their homes. They may want to ensure their policy offers enough money to pay off their home loan in full so surviving loved ones can inherit the house free and clear of debt.

  • Education: If a person has children when determining how to get life insurance, it is a good idea to ensure the death benefit is large enough to cover their educational costs.

Select the type of life insurance policy that's best for you

There are different kinds of life insurance. The two most common and comprehensive types are term and whole life coverage. But what is the difference between term vs. whole life insurance?

Term life insurance remains in effect for a limited term, or a set time period. For example, a policy may provide 15 to 30 years of coverage. If the policyholder purchased a 30-year term policy, the death benefit would be paid to surviving loved ones if they died during the 30-year term. But if they died 31 years or more after their coverage went into effect, no death benefit would be paid.

Whole life coverage doesn't have a set term of coverage. It can remain in effect indefinitely as long as the policyholder pays premiums. It also has an investment component. The policyholder pays extra money in their premiums above the cost of providing insurance. The money is invested. The policy acquires a cash value and policyholders can surrender it or borrow against it to obtain money.

The good news is, it is now easy to buy life insurance online, so comparing quotes is simpler than ever.

Apply for life insurance

There are multiple different steps involved when determining how to buy life insurance. These steps go beyond simply making the choice to apply for life insurance. Here are some of the things that consumers will need to do:

Collect the documents you'll need

When a person decides to buy life insurance policy protections, it's important to gather any necessary documents.

This can include identifying documentation such as a driver's license. Having medical records ready to refer to can also be helpful in answering application questions accurately.

Choose coverage options

When determining how to buy life insurance, it's helpful to consider what type of coverage is desired.

This means deciding between term and whole-life coverage. Consumers may also want to research riders they are interested in. These provide add-on coverage, offering additional protection. Some common riders include:

  • Return of premium rider: Allows policyholders to get their premiums back on a term life policy if they do not die during their coverage period.

  • Accelerated death benefit rider: Allows policyholders to access some of the money from the death benefit while they are still alive to cover medical costs associated with a terminal illness.

  • Waiver of premium for disability rider: Allows policyholders to keep their coverage in effect but to stop paying premiums if they become disabled.

  • Compare quotes: One of the best ways to make life insurance more affordable is to compare quotes before committing to purchase life insurance. By comparing quotes from multiple insurers, it's possible to get the best term life insurance rates.

It's a good idea to determine what coverage is desired first before comparing quotes. When determining how to get life insurance, it's also important to research options for where to buy life insurance. Consumers can shop online. They can also work with insurance agents that are employed by insurance companies. Or they can work with independent agents that will help them shop for coverage with multiple insurers.

Submit an application

After researching insurance options, consumers can submit an application to the company that provides the lowest preliminary quotes. Applying for coverage will involve answering more detailed questions about medical history and health status, as well as providing identifying information.

Take the medical exam

In most cases, it's necessary to take a medical exam when figuring out how to get life insurance. An insurance company arranges this exam with a medical professional the company employs. The medical professional will come to the applicant and perform a basic physical, including taking a blood and urine test.

The results of the exam, along with answers to medical history questions, will determine if the insurer offers coverage and what the premium costs are.

Sign up for coverage

Finally, consumers can review the premium and coverage terms offered by the insurer after the medical exam and then buy coverage.


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