Where to find the right kind of policy for you
If you die, life insurance provides a financial safety net for your spouse, children, and other family members. Purchasing life insurance is not always at the top of the to-do list, in part because most people dislike thinking about death. Here's how to buy the life insurance you need, whether you're just curious, looking for information, or ready to sign up.
How and Where to Buy Life Insurance
Life insurance does not come in one size fits all. You must decide on the type, length, and amount of coverage you require. As an example, you could purchase a 20-year term life insurance policy with a $500,000 death benefit.
Of course, you must also decide where to purchase it. There are four general places to get life insurance:
- Directly from a life insurance company
- From a life insurance agent
- From a life insurance broker
- Online
Buying Directly From a Life Insurance Company
If you want to go through an insurance company, you can usually purchase a direct term policy. This type of policy covers your insurance needs for a set period of time, such as ten, twenty, or thirty years.
To purchase this type of policy, you typically fill out an online application, compare prices, select a policy, and pay. You may be able to purchase a guaranteed issue policy that does not require a medical exam, depending on the company. A guaranteed issue policy may be a good option for people who would otherwise be unable to obtain life insurance due to health issues.
A direct term policy is a quick way to buy coverage, especially if you know exactly what type of coverage you want (and it happens to be something that the company offers). If you need advice, have questions, or want more options, you're probably better off working with an agent or broker.
Buying Through a Life Insurance Agent
The majority of life insurance policies are sold by agents and brokers. Both act as go-betweens for insurance companies and insurance buyers. Both must also be licensed to sell insurance products in the states where they operate. However, while the two titles are frequently used interchangeably, there are some significant differences.
The most significant distinction is who the individual represents. An insurance company appoints an agent to sell its products. A captive agent is one who represents only one insurance company, whereas an independent agent is one who is affiliated with several companies. Life insurance agents represent businesses, not individuals. Their goal is to sell you insurance from the companies they represent, which may or may not be what you require.
Buying Through a Life Insurance Broker
Brokers, on the other hand, represent insurance buyers rather than insurance companies. They work independently and have no contracts with any insurance companies. That is, they should be able to make unbiased recommendations that are tailored to each customer's specific requirements. Brokers typically work with a wide range of insurance companies to provide customers with a variety of price quotes and plans.
- Term life insurance is less expensive and easier to obtain than permanent life insurance, which combines life insurance with an investment account.
Buying Online or in Person
If you choose to work with an agent or a broker rather than going directly through an insurance company, you must also decide whether to shop locally or online.
If you want personalized advice, are considering permanent life insurance rather than term life, or have a complicated situation, a local insurance agent or broker is a good option. An agent or broker is also a good option for those who are not very tech-savvy and would struggle to navigate an online application.
If you have a general idea of your coverage needs, want a term life policy, or prefer to shop on your own, an online agent or broker may be a good fit. There are also numerous quote comparison websites that can provide you with quotes from a variety of insurance companies.
Common Life Insurance Credentials
Many life insurance agents and brokers have industry accreditations, such as The American College of Financial Services and The Institutes (formerly the Insurance Institute of America), attesting to their expertise. The following are some examples of common designations:
- CFP—certified financial planner
- ChFC—chartered financial consultant
- CLU—chartered life underwriter
- FSCP—financial services certified professional (this replaced the designation of LUTCF, or “life underwriter training council fellow”)
If an agent or broker you're thinking about working with has a designation (or multiple designations) that you don't recognise, ask what the acronym stands for, which organization issued it, and how they earned it.
Buying Life Insurance During COVID-19
The COVID-19 pandemic has presented the life insurance industry with some new challenges. For one thing, when people are supposed to be socially distancing, in-person physical exams are difficult, if not impossible. Life insurance companies are still open for business, accepting applications and adapting client onboarding procedures to accommodate the changing landscape.
Some insurers, for example, have begun to evaluate medical records, prescription history, and the like—rather than sending a paramedic to your home or office to see you. Others have increased the time required to complete a traditional exam while providing temporary, interim coverage. You can also communicate with agents via phone or videoconference and electronically sign documents.
Expect COVID-19-related questions on your application, such as "Have you or anyone in your household been tested or treated for COVID-19? " or "Have you taken a cruise within the last 60 days?" " Keep in mind that answering "yes" to these questions should not prevent you from obtaining a policy; however, answering dishonestly may result in the cancellation of your policy later.