So you've decided that life insurance is the right financial planning tool for you. Your next thought may be to begin coverage to start reaping those benefits today. While that's a great idea, you're going to want to complete a few important steps to ensure that your application process is smooth, including you know what you're looking for in a life insurance policy!
1. Research Policy Types
After you've answered the question of "what is life insurance," it's time to get to work on shopping for a plan. Life insurance is usually spoken about in general terms, but the reality is that there are multiple types that can be tailored to each person's unique needs.
Whether that be a term policy that offers coverage for a set amount of time or a whole policy that covers your entire life from the point of purchase, there are options. Within each of these are further divisions like the number of years you'd like coverage for in regard to term life insurance or which type of permanent policy you would like, whole or universal.
2. Calculate How Much Coverage You Need
An important part of applying for life insurance is to make sure you have the coverage that you need to make the investment worthwhile. The last thing you want is for a life insurance provider to approve you for a plan that offers less coverage than you need.
You'll be locked into that plan for years, if not forever, making it necessary to purchase a supplementary plan, essentially doubling monthly premiums. Try to avoid these complications for calculating the coverage you need and shopping for plans that meet that need early on.
The general rule of thumb is that your life insurance policy should be at least 10x your annual income. So if you're making $100,000 a year, that's a million-dollar policy or $200,000 for someone earning $20,000 a year. That is a very limited model, though, and you'll need to also factor in things like your dependent's college needs or your mortgage payments that will need to be paid in your absence.
Life insurance companies will usually work with you to help you determine the necessary coverage amount for your case. One thing that they'll look out for more so than underinsuring yourself is allowing you to over-insure yourself.
3. Research Life Insurance Quotes Online & Companies
It's easier than ever to shop for life insurance companies or quotes that fit your need. Simply run a search for local providers or providers that fit your specific needs. For example, "life insurance providers, no medical exams" or "life insurance providers, low premiums." From there, you'll be able to whittle down your options and find one that works best for you.
4. Gather Your Documents
Life insurance underwriters will usually want to sit down with you, whether virtually or in person, to understand your unique needs. While they might have a list of specific paperwork to bring to your appointment, here are a few general pieces of paper you might need for the application or interview process.
- Proof of ID (state ID, birth certificate, driver's license, social security number, or card)
- Contact information (phone number, address)
- Employer (job title or function, self-employment details if applicable)
- Financials (net worth, assets, liabilities, dependents)
- Medical history (in-network medical exam report, long-term health chart)
All of these details and paperwork will be used to determine your eligibility for a health insurance plan. Because requirements can vary, you'll need to check with you're your potential insurer to see what is required.
The Bottom Line
Life insurance is the perfect way to round out your financial wellness plan. Before purchasing a plan, there are a few key steps to take in order to make sure you've got everything you need to be successful. By following these steps, you can ensure that your application process is smooth and you find the coverage you need for your life.
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