Life Insurance

Life Insurance Buyers Guide: 5 Crucial Steps Buyers Should Take While Shopping For Life Insurance

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Purchasing life insurance doesn’t have to be daunting. Most Life Insurance companies do their best to have a seamless process for their policy owners.

Still, taking a little time to follow these five easy steps can help you set appropriate expectations, avoid unnecessary stress, and solidify a streamlined process. Let’s get started!


Step one:

Now that the need for life insurance is established, it’s crucial to determine the appropriate coverage amount. With your reasons for needing insurance in mind, begin outlining your insurance plan.

If your goal is income replacement, initiate the process by calculating the annual income you wish to replace, multiplied by the number of years you deem sufficient for your beneficiary.

Keep in mind, this is a preliminary estimate; your agent or broker will fine-tune these figures, considering factors like inflation and salary increases. However, having a personal estimate is equally important for buyers.

Here’s why:

  • Premiums

Once again, this is just an estimate, but an estimate is still helpful when it comes to budgeting the amount of insurance you can afford. Rough numbers can at the very least, provide you with a range of what your premiums may look like.

  • Inform your beneficiaries

Alleviating potential burdens for beneficiaries is a common purpose of life insurance. Including your beneficiary at this stage can provide a second set of eyes to help review your plan for additional life insurance needs that may have been overlooked. It will also set expectations for your beneficiary and help streamline the process of sorting through your finances upon your passing. 

  • Help avoid negative sales experiences

Crunching these initial figures can help prevent being “overinsured.” Even though these figures will be a starting point, this exercise will help you decipher which suggestions truly coincide with your needs and which are simply “upsells.”


Step two:

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Prepare yourself for the application and underwriting process. Prepping ahead of time will help set expectations and create a more streamlined application process.

Listed below are some common questions found in life insurance applications. Insurance carriers will then utilize this information to determine your risk class and premium amount. 

  • Full name(s) for:
    • The policy owner.
    • The payor.
    • The insured.
    • The beneficiary or beneficiaries.
  • DOB, address, social, & gender for:
    • The policy owner.
    • The insured.
    • This is not mandatory for the beneficiary but is helpful for the insurance company to have to help simplify the distribution process.
  • For insureds only: 
    • Your health history and your family’s health history: The insured will need to disclose if they’re a smoker or non-smoker, any previous medical procedures, and their family’s health history. 

    • Current health status: In addition to general health disclosures, the insured must complete a questionnaire on their current health status.
    • Medical Exam: Depending on the requested benefit amount, a medical exam may be mandatory, and your physician may also have to fill out a questionnaire on your health. Some insurance companies will utilize your medical records to determine if a medical exam & physician’s statement is necessary.
    • Lifestyle: Questions concerning the insureds, occupation, driving record, hobbies, and criminal background. Occupations that expose more risk (for example, pilots, window cleaners, law enforcement, etc.) may have higher premiums. The same goes for insureds previously incarcerated or with messy driving records.
  • The application and underwriting process varies between insurance companies.
  • It is standard for insurance companies to request proof of identification.

Step three:

It’s best practice to research policy options and company reviews. Policies are only as strong as the issuing insurance company. 

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Step four:

Make sure you have a good understanding of the life insurance illustrations that are presented. 

  1. Learn and understand the mechanics of the life insurance product(s) presented.
  1. If you’re advised to consider multiple policies, ensure you comprehend the rationale behind this recommendation.
    • For instance, if a broker suggests both a term policy and a second universal life insurance policy, clarify why these two products align with your objectives. Don’t hesitate to ask why each specific product was recommended, ensuring alignment with your financial goals and needs.

Example: Why was the second policy a universal life policy and not a basic whole-life policy? They’re both permanent policies, so what makes one more appealing than the other?


Step five:


Compare quotes. That’s probably obvious for most, but it never hurts to remind you to compare the company ratings, premium cost, and policy features.

Life insurance policies are long-term commitments, so consumers should take the time to digest each option to confidently select the one that makes the most sense for them and their beneficiaries.


Disclaimer: The opinions expressed in this blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security, investment, or insurance product. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice.


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