How to Compare & Buy Life Insurance

Last Updated: April 18, 2019

While many people know life insurance is essential for keeping their family secure and protected in the event of their death, not many of them know how to go about choosing a life insurance policy or what kind of coverage they need. If you’re working with an experienced agent, finding the perfect life insurance policy needn’t be expensive or complicated.

Purchasing life insurance is one of the most important financial decisions you can make in your life. At Term Life Advice, we know the most challenging aspect of choosing a life insurance policy is getting started. Because of that, we’ve compiled a comprehensive guide to choosing and evaluating policy options, plans, and insurance companies, and what to expect when you apply.

Quick Article Guide

1. What to Expect During the Life Insurance Application Process 
2. Choosing Your Policy and Coverage Amount
3. Comparing Life Insurance Quotes

What to Expect During the Life Insurance Application Process

Before you get into choosing your policy and collecting quotes, we want you to have an understanding of what to expect when you apply for life insurance. Our agents will always keep you informed of where you are at in the application process, the status of your application, and any actions that must be taken on your part.

Much of the application process is waiting, however. You’ll have to wait for your medical records to ordered and reviewed, for medical exam results to be processed, and for the life insurance company to review your paperwork, among other steps in the process. So it’s important to keep in mind that while the application process isn’t complicated, it can be time consuming. Most life insurance companies take anywhere from 4 to 8 weeks to approve an application.

Once you have chosen your policy and are ready to get started, there are essentially five steps to the application process before you are approved and insured.

1. Fill Out the Application

The application will require you to answer several questions about your health, and a few questions about your occupation and hobbies. You’ll also be required to sign an authorization form to allow your medical information to be shared with the life insurance company and their underwriting partners. And in most cases, you’ll need to provide documentation for your income (like tax returns or pay stubs).

2. Complete a Medical Exam

While there are no-exam policies that can be beneficial if you have a preexisting condition or need immediate approval, you’ll often find lower rates with a policy that requires a medical examination. The medical exam takes about 30 minutes and can be completed at your home, office, or in a medical facility. During the exam, a licensed nurse or phlebotomist will measure your height, weight, blood pressure, and obtain a small blood and urine sample.

Once completed, the results are available to all other life insurance companies, so if you decide to cancel your application for any reason and apply with a new company, you will not have to take a second exam.

3. Have a Phone Interview

Most no-exam life insurance companies require a phone interview before approving your life insurance policy. The phone interview typically takes about 20 minutes to complete. You’ll speak with a licensed nurse or representative of the insurance company, and he or she will ask you several questions about your health and lifestyle. The insurance company will ask for your primary physician’s contact information (and any doctors you’ve recently visited) so we recommend having this handy before your call.

If you’ve already completed an in-home exam, your insurance company will rarely require a phone interview. If they do have questions about your application, they’ll likely contact your agent who will relay those questions to you.

4. Wait for Approval

After you’ve filled out the application and completed your medical exam and phone interview, all that’s left for you to do is wait. The insurance company will review all your paperwork and information and decide if you’re approved and what your final monthly premium will be. The approval process typically takes 4 to 8 weeks depending on the amount of time the insurance needs to retrieve your medical records.

When the insurance company issues the approval, our agents will contact your prior to issuing your policy. Most life insurance companies will allow you to adjust your coverage or term prior to sending you a copy of your approved policy.

5. Sign the Policy

Once you’re approved, you just need to sign your policy, which the life insurance company may send via mail or email. As soon as you sign the policy and pay your first monthly premium, the policy goes into effect and you’re insured. Be sure to keep a copy of your life insurance policy somewhere safe, either in a safe or with a trusted third-party, like a beneficiary or lawyer.

Although you’re all set after this final step, you should make it a point to regularly review your coverage. Life events, like the birth of a child or applying for a larger mortgage, may prompt you to purchase more coverage.

Choosing Your Policy and Coverage Amount

Now that you know what to expect when you apply for a life insurance policy, you need to know what type of policy and amount of coverage is best for you and your financial situation.

Types of Policies: Term Life vs. Whole Life

While there are many types of life insurance policies, the two most common plans are term life insurance and whole life insurance. Both offer a financial safety net for your family but have different aspects that can be beneficial to people in different situations.

With term life insurance, you’re covered for a pre-determined amount of time, or term. You pay a monthly premium and your insurance company pays out the death benefit to your beneficiaries for the amount of your coverage. This type of policy is relatively straightforward and works for most of our clients.

When choosing the term length of your policy, ideally it should last until your longest financial obligation is paid off. That may be the length of your mortgage, or it may be the year your children have all graduated from college. Term lengths are typically sold in five-year increments, so 10-year terms, 15-year terms, up until 30-year terms. You should round up in years to make sure your family is covered; so if it’ll take another 21 years to pay off your mortgage, you should purchase a policy with a 25-year term. Once your financial obligations are paid off, you can always cancel your policy before it expires.

If you have whole life insurance, on the other hand, it is a bit more complicated. You’re covered for your entire life as long as you continue paying your monthly premiums, and while whole life insurance has the same death benefit features as term life insurance, it also allows you to build up a cash value. This component is supposed to grow year to year with a minimum guaranteed growth rate, but it is also subject to maximum fees. If you’re working with a financial planner, this type of policy can be a great investment opportunity in addition to offering protection for your family.

Choosing Your Coverage Amount

Deciding your coverage amount is usually a more straightforward process than choosing the type of policy to purchase. Life insurance is supposed to be a safety net to protect your family from debt and to help replace lost income in the event of your death, so ideally, your coverage amount will provide for both those financial aspects.

It’s easiest to start by calculating all the major debts you may currently have. These may include your mortgage, car payments, student loans, credit card debts, or any other outstanding payments. The debts you have now don’t just disappear when you die, and anything left unpaid will be taken out of your estate. Having life insurance to cover your debts—at a minimum—means you’ll be able to leave your family the full amount you had saved for them as part of your estate.

With your debts covered, you should next consider using your life insurance as a replacement income. This would give your family financial security above and beyond becoming indebted, and the amount is completely up to you. Some factors to think about when calculating this amount are:

• The total income your family will miss out on in a year, in two years…
• College tuition cost for each child
• Retirement funds for your spouse

The amount of life insurance coverage you need should be a balance between what your family will need to remain financially secure after your death and the amount of premium you can comfortably afford to pay each month. It’s possible to be over-insured if you’re paying more than your financial means or paying for more insurance than you ultimately will really need. You can talk to your family, spouse, financial advisor, or one of our Term Life Advice agents to determine the amount of coverage that makes the most sense for your situation.

Comparing Life Insurance Quotes

Many people will seek out an agent—hopefully an independent life insurance agent—or use online quote tools when searching for a life insurance quote.

No matter where you get your quotes from, they should all be the same because rates are actually regulated by the state government, not the insurance agent or insurance company. Once a year, every life insurance company builds out a rate table that shows how they calculate the cost of life insurance based on specific health conditions and lifestyle practices. So whoever or whatever is giving you your quotes, it’s all based on the insurance company’s rate table. The quote will be the same across the table as long as you’re looking at the same insurer, coverage, and term.

With that being said, not all quotes you find—online or otherwise—will be accurate. When a quote tool or agent gives you a rate or puts you into a rate class without asking you detailed health questions, you probably won’t be getting an accurate quote. Only an insurance company’s underwriter can calculate your exact rate class and give you an exact quote; this is because of the specific rules and classification guidelines involved in a company’s particular rate table. Insurance companies are also very conservative when it comes to estimating their risks; what you or your insurance agent may assume is a non-issue, might be a big deal to the insurance company.

However, that doesn’t mean you should be completely wary of a quote provided by an online tool or agent. As long as you take an exhaustive health survey upfront, your initial quote is a very good estimate or jumping off point to what you can expect to pay.

Once you start receiving quotes, it’s important to compare the different policy, rates, and insurance companies before purchasing your life insurance. The best thing to do is create a spreadsheet to collect the information so it’s easier to compare. These are the five most important pieces of information to note about your quote, and why they each play a significant role in your comparisons:

• The name of the insurance company: while each insurance company has a different rate table and way of classifying medical conditions and lifestyle risks, the quotes from the same company should be consistent

• The place where you got the quote: this helps you keep track of where you got the best quote so you can follow up with them once you’ve made your decision

• The underwriting class or rate class you were quoted: because your rate or underwriting class directly affects your final quote, it’s important to record what class you’re being quoted into

• The amount of coverage and term length you requested: these two factors also directly affect your final quote, so you want to make sure you’re using the same coverage and term amounts with every quote you’re requesting

• The amount quoted for your monthly premium: this will obviously help you decide which quote is the lowest price 

Tracking all this information gives you an even playing field for comparing your quotes. Once you decide on the best quote, you can apply for the life insurance policy through whatever source you received it from. Or, because all policy prices are the same no matter where you purchase it, you can contact a life insurance agent who will help you apply and walk you through the process.

At Term Life Advice, we work with more than 60 top-rated life insurance companies. Our licensed and experienced agents can sift through thousands of quotes to help you find the policy that best fits your situation and budget. Call us today toll free at: 855-902-6494 or request a quote online and one of our agents will contact you to get you started.

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