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How to Buy Life Insurance Online


Buying life insurance online is a multi-step process; here's how to get started.Last December, my wife and I welcomed our second child, Elliot, into the world. As parents, we are ecstatic but weary. As a no-longer only child, big sister Molly remains skeptical.

They say that having two children is more than twice the work of one, but I think that having the first – going from carefree and childless to a responsible parent – is the more difficult transition.

After Molly’s birth, for example, we mourned the loss of free Friday nights, leisurely dinners out, and snoozing past dawn. This time around, we’re used to all that. Now we just have to learn to take care of a toddler while cradling a newborn (and vice versa).

Financially, when Molly was born we adjusted our budgets to include diapers, day care, and…life insurance! This time around we’ll just have to tweak the line items.

Life insurance is the critical component of financial security that nobody wants to handle. Life insurance is confusing. Life insurance is boring. Life insurance is depressing. And let’s not forget the little tickle in the back of your mind that wonders if your spouse will kill you for the payout – the result, no doubt, of watching one too many episodes of Dateline.

But as soon as somebody relies on you for financial support (perhaps a spouse, but definitely a child), you should have life insurance.

Get free life insurance quotes online now

My experience buying life insurance

Just after Molly was born, I bought my first life insurance policy. Later that year, Lauren bought one, too. Here, I’ll share with you what it was like and what you can expect if you want to buy life insurance online or through an agent.

Before we get started, there are many different types of life insurance, but for 90 percent of you the only one I recommend is term life insurance. It’s the cheapest and most straightforward kind of life insurance. Term life insurance works just like other types of insurance — you pay an annual premium that’s fixed for a set number of years and, in the event you die, the insurer pays out a benefit. Other kinds, such as whole life, double as investments that let you keep and borrow against your premiums. These whole life policies sound attractive but are actually more costly for most people.

How to buy term life insurance

If you work with an independent insurance agent you trust, he or she may be your first stop to discuss life insurance, and that’s fine. Just know that your agent may present you with different types of life insurance and the choices may be overwhelming. I found it was easier to ascertain that I wanted level term insurance first before going shopping.

As you Google around, you’ll likely be overwhelmed with ads to buy life insurance online or get life insurance quotes (they’re probably even on this site now). And these sites are a fine place to start, but you should understand a few things:

  1. You can’t really buy life insurance online. The process involves a ton of questions, paperwork and, in most cases, someone coming to your home to give you a brief medical exam.
  2. Better sites will have single agents that you can work with directly, but some sites will simply share your contact info with dozens of agents, meaning you’ll get a ton-o-spam. Be prepared for that.
  3. The price quotes you get online in seconds are rough estimates at best.

So if you go to one of these life insurance quote Websites, here’s what to expect:

You’ll complete a brief form about you: Gender, age, weight, and whether you smoke (smoking is the biggest factor in pricing life insurance. Prepare to pay double if you smoke.) Most sites will require an email address and phone number before spitting back some quotes.

These quotes will be based on how much insurance you want and the term (how long you can be covered for the same premium). Commons terms are 10, 20 and 30 years. How much life insurance you need is a complicated question that this post can help you figure out.

You may be surprised to see a wide range of prices from different insurers. But without a more detailed application, most of these numbers are just guesses. Insurance companies employ actuaries who do nothing but crunch numbers to determine how to price insurance.

On a high level, insurance policies are divided into classes with ambiguous names like preferred, super-preferred, standard, or substandard. The insurance industry uses these broad groups to classify customers by risk. For example, if you are perfectly healthy, have a low body mass index (BMI), and do not have other risk factors (like smoking, dangerous activities, or a lousy driving record), you may meet the super-preferred class. By contrast, somebody who is overweight and has high blood pressure may only classify for the standard class and will pay much more for the same insurance.

Although life insurance classes can provide broad guidelines of what you can expect to pay, every insurer works differently. For example, let’s say you have a hobby that insurance companies consider high risk – like flying a plane or rock climbing. Some insurance companies may place you in a lower class and charge you more for these “high-risk” activities. Another insurance company may insure you in a higher class, but place exclusions on your policy meaning you won’t receive a benefit if you die as a result of those activities.

This is the first reason why shopping around for life insurance is so important and why online quotes are just the beginning. The second reason is the medical exam.

An insurance agent will ask you some more detailed questions about your health and lifestyle to hone in on the company that will offer you the best rate. At this point, he or she will give you a quote that will be accurate pending the results of your medical exam.

Most life insurance policies require a medical exam. Some don’t, but they inevitably charge much more than you need to pay because they’re taking the risk that you have a medical condition and could die prematurely.

Life insurance medical exams sound like a pain, but the reality is they try to make them as easy as possible for you. The examiners, called paramedical professionals, will call you to set up an appointment at your convenience – they’ll come to your office during the day or your home very early in the morning. (Mine came to my house before 7 a.m.!)

The examiner is trained to get a thorough medical history, take your blood pressure, and draw a blood sample that will be sent to a lab to test for cholesterol and glucose levels; tobacco and drug use; and diseases like aids. These results will be shared with you by mail.

In life insurance applications, honesty is paramount: don’t be surprised if you must answer the same question about your medical history or tobacco use five times, but always answer honestly. Insurance companies share information, so misrepresenting information might not just get you denied from one carrier, but banned from many. Worse, it could give the insurer legal grounds to deny your family’s claim in the event you die.

The insurance underwriter’s job is to take all the information from your application and medical exam and decide whether to you insure you and how much to charge. This takes many weeks. You’ll want to ask your agent whether the carrier binds any life insurance upon receipt of the application. For example, when you submit your application and a check for your first premium, many carriers will insure you for something, although not the full amount you’re requesting, pending completion of the underwriting process.

When your policy is approved, it is placed in force and you will receive notification, along with a full copy of the policy. You should make a copy of this policy, place each in different safekeeping spots, and notify your spouse where they are. Finally, you can relax knowing that one of the most important pieces a solid financial plan is in place for you and your family.

Do you have questions about applying for life insurance online or otherwise? Share your questions in the comments and we will try to answer them for you.

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The best way to start shopping for life insurance is to get rough quotes and then speak with an experienced agent who can guide you through the process. Start now with a free, no obligation quote:

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Hi there. I get regular feeds on life insurance posts (financial advisor) i was reading your blog or article on life insurance (congrats on the new addition btw) what was a little disturbing was the advice you are giving.what is great is that you are telling your readers to get insurance or look into it. But to reccomend term insurance as the best option due to cost is misleading and if you look at actaul cost of insurance over tiime….wrong. What disturbed me was in your example the life insurance agents role seemed only to be what companny to pick? What about the actual analysis …needs analysis as to what you actually would need to cover …not just debt but income replacement. If you had done one you would have had a discussion about critical illness insurance as well which statistically has a far greater likelihood of occurring. So my message is CAUTION….in giving financial security advice price is not always the main event. Happy 2013!

    • David E. Weliver says:

      J, thanks for reading and your input. My argument for term life insurance isn’t solely because it’s cheaper but because steady self-directed long-term investing results in greater wealth in the long run than buying permanent insurance. I would rather counsel a young reader with 30-40 years ahead to invest (the audience here) to spend a little bit on term insurance and get into the lifelong habit of investing than buy an expensive permanent policy. There are volumes of arguments for this approach from objective sources (i.e., not compensated by selling financial products like insurance policies). Here is one from the Wall Street Journal.

      We have an additional discussion of permanent versus term and “invest the difference” here, where commenters from both sides weigh in.

  2. Is there any average as to what one “under 30″ can expect to pay? Obviously there are many factors at play, but I got one quote from my insurance guy today that I thought was particularly high.

  3. I think term life insurance is a good place to start; but for me personally it was not worth keeping. I started out with a 10-year term life insurance when I was 22, as I was taking out private student loans co-signed by my parents. By the 5th year, I realized 10 years was not nearly long enough for life insurance, since it will be 15 more years before I will have my student loans paid off. I had it converted to variable universal life insurance. Yes, it’s costing me over 3x more per month, but now I have a life insurance policy that will build cash value. And since I was converted from my term life insurance, I was rated at my age and health when I was 22.

    The biggest reason I had my life insurance converted was so that I could cancel when I felt comfortable doing so. I’m not sure if I will have a family or not. I don’t plan to do so, but if I do, the life insurance is there. I have a disabled brother. If I believe he will be OK when I pass away, I can cancel the life insurance. The benefit over term is (for my policy, at least) after the 12th year, I am entitled to a portion of my premiums. If I remember correctly, it varies for variable universal life, and 100% for whole life insurance, but whole life costs 2x more.

    My recommendation would be to get a term life insurance policy NOW, but with a reputable insurance company who will allow you to convert your policy if you decide to do so in the future. I’m glad I did!

  4. It’s so easy to talk yourself out of being able to afford life insurance, but the alternative is possible poverty for survivors in your family. We finally bit the bullet after we had our 3rd child, and bought a 20 year term policy (that is convertible, but we probably won’t opt for whole life insurance yet). For $133 a month my wife and I are covered for one million dollars (me $750k, her $250k because she works part time and my income is 3/4 of our total income). My best advice for people is to purchase it while you are young and healthy, and lock in a nice, low rate.

  5. Life insurance and investing in regards to planning for my future have always kind of been at odds with one another… On one hand, I’m paving very carefully plans for my future and on the other hand, I’m planning for a future without me in it. Sad and depressing but I suppose I’ll have to reconcile because it does make sense to get life insurance.

  6. This free quote section you have at the bottom of your article gave out my address and phone number which I am now receiving non stop calls. I am a big fan of this website and appreciate this article but I don’t appreciate that at all.

  7. For all you young professionals out there… try to be forward thinking regarding this matter. Most of you will have a family someday, and this will be something you procrastinate until perhaps baby #1 pops out.

    I’ve lost 7 cases in the last 6 weeks because clients were uninsurable. They didn’t think it was something necessary to worry about until down the road (maybe because that’s what someone told them or what they read online), and now they have health issues. I understand its hard to commit to the concept of spending more money on INSURANCE, but do understand how easy it is for these companies to say Thanks but No Thanks for your business.