Applying for life insurance isn’t as enjoyable as going on vacation, but the process isn’t difficult either. Here are seven easy steps to guide you through the process.
1. Figure out how much you need
You may be able to decide how much life insurance to get on your own or you may need help. Either way, you’ll find online calculators for estimates or verification. Feel free to try more than one. For personal advice, consider an insurance advisor or a fee-only financial planner.
If you’re only getting enough protection to pay off your mortgage, you’re probably underestimating your need. What about the cost of your funeral and other final expenses? Your family could dip into the emergency fund or take on more debt. Is that ideal?
What about replacing a portion of the income your family loses when you’re gone? You may be tempted to save on premiums by limiting the replacement to between two and five years of income. That gives your family time to adjust to life without you, but how comfortable will they be? If you buy more, you could provide income until your children are adults or graduate from university.
2. Find out if you qualify
You can’t get life insurance just because you want some — you must qualify first. Factors that affect your eligibility include your health, your hobbies, and the places you travel.
If you have concerns, you can find out about your insurability anonymously through an insurance advisor. That’s wise because once you apply, you’ll be in the MIB database. Previous rejection affects your ability to get insurance in the future and the price you pay.
3. Get the prices
Don’t start your search for life insurance with your target budget. There’s much more to protection than the price. Getting the right amount for the right length of time are the key factors. Products differ in their guarantees and flexibility, and companies have different reputations, too. You want to maximize the probability of getting a claim paid quickly without hassles — especially since you won’t be available to overcome delays and obstacles.
4. Adjust to your budget
You may find that your budget prevents you from getting your desired amount of life insurance for as long as you want. Permanent coverage is often desirable because that guarantees a death benefit will be paid one day. Term life usually expires before a payout. Unfortunately, permanent insurance may be too expensive for you today. You may only be able to afford Term 10. That doesn’t stop you from:
- Getting permanent later (either new or by converting your term insurance).
- Blending term and permanent.
In the same way, you may need to reduce the amount of coverage. That’s still better than having no insurance.
You may dread this is the step and procrastinate. A good insurance advisor can make the process painless. The most important aspect is to be honest on the application even if the form is confusing or strangely-worded. Concealing information is fraud and grounds for the insurance company to cancel your coverage or deny the benefit claim. Your beneficiaries lose.
6. Approval and delivery
The insurance company will take some time – usually four to eight weeks – to process and underwrite your application. They may ask for additional information or clarification. In many cases, a paramedical exam is required. Once the insurance company has approved your application, your advisor will deliver it to you, provided your insurability hasn’t changed since you applied (health is the main consideration here). Congratulations, you’re now protected.
Protection brings peace of mind for you and those you care about. You can now relax. Review your policy occasionally to make sure it matches your current needs (and keep paying your premiums).
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