1. Consider What You Want in a Policy
First, think about what you’re looking for in a life insurance policy. These factors may include:
- Type of policy: You can choose between term and permanent life insurance policies. Permanent coverage is available until the insured dies and includes a cash value account, while term policies last for a set period. Additionally, if you’re married or in a domestic partnership, you may want to buy survivorship or joint life insurance that covers both you and your spouse/partner.
- Premiums: Determine how much you could afford to pay in premiums. You could pay premiums monthly or in less frequent but larger payments. You may be able to save money by paying less frequently.
2. Calculate The Death Benefit
- Taking multiples of your salary, often 10 to 15 times
- The DIME method, which involves adding your existing debts, mortgage balance, child’s future education costs and annual income multiplied by the number of years your dependents will live off of it
You can also work with an insurance agent or financial advisor to calculate a more accurate figure, or use our life insurance calculator.
3. Compare Life Insurance Companies
Research life insurance companies and their policies, and then get quotes to compare costs. Be sure to select the same type of policy, death benefit and riders to make an apples-to-apples comparison.
4. Determine Beneficiaries
- Partner/spouse
- Children and other relatives
- Charitable organization
- Trustee of a life insurance trust that you’ve created
- Estate
Keep in mind that if the designation is revocable, you can change your beneficiaries as long as you’re the policyholder. However, if the beneficiaries are irrevocable, you’ll need their consent before you make any changes.
5. Choose Policy Riders
The available life insurance riders will depend on your company and policy. Some may come standard with your policy, while others will require you to pay an additional premium.
6. Complete the Application
The life insurance application may include a health questionnaire, even for no-exam life insurance. Depending on the company, you may have to complete your application online, in person or over the phone.
Fill out the application truthfully, as giving false information can lead to your policy being contested or the claim being denied, and may constitute insurance fraud.
7. Take a Medical Exam
The underwriting process may include taking a medical exam so the insurer has an accurate assessment of your health and your family’s health history.
Insurance companies may require medical exams to assess your overall risk level, which will determine whether they want to insure you and, if so, how much you’ll pay in premiums.
8. Sign the Contract and Pay Premiums
Your policy will become active on its effective date after you pay your first premium.
From then on, you’ll pay premiums regularly, typically monthly, although single premium life insurance exists, which requires only one upfront payment.
