Chapter 2 – Steps for buying life insurance
It is time to consider life insurance when you take on a large financial liability that requires an ongoing need for protection. This can be a combination of buying a home, being married, having children, taking on substantial consumer debt, or owning a business. Here are some steps to follow when you are considering buying life insurance.
Seek out an insurance agent. The insurance agent should be an independent broker, not a captive agent that works for one company. Independent brokers work like mortgage brokers in that they work with several companies to find you the best prices and products.
Have a discussion with the agent to decide if there is a good fit for a professional relationship. They may be your insurance advisor for a lifetime, regularly evaluating your ever changing needs, so a comfortable relationship is beneficial.
Learn from the agent about insurance and how it works. Don’t worry, it won’t be that bad! A basic understanding of each product helps you know why a certain product is being suggested or avoided.
Complete a thorough needs analysis. This will include questions about your life and where it is going. the agent compiles the simple facts like income, dependents, and other debts you may have. Next they talk about the items that are more difficult to predict. Will you have kids? Will you have a bigger home/mortgage in the near future? Do you want to buy another vehicle? What about providing income for your remaining loved ones? Again, don’t worry, the agent should explain all of this in simple language that is easy to understand.
After a needs analysis is done, and the amount and type of insurance is selected, the agent can get some quotes. Agents use software that helps build insurance models that can be presented in a few minutes. Once the quotes are looked over and found to be satisfactory, the process of applying for the insurance begins.
The application process for insurance is a detailed and personal one. You and your agent will go through an application package that asks questions about past history. While the questions may be personal, you can be assured that no one will see the answers except for the agent and the insurance company. Your information is treated the same as at a doctors office: with both respect and absolute privacy.
Along with the completed application the agent will collect a cheque paying for the deposit, which also happens to be the first premium payment. The application is then sent off for underwriting. Underwriting is a process that the insurance company goes through to review your information and determine what type of risk you pose to them. This will help determine what rate you will pay.
Medical exam. A phone call will be made to you from a paramedical nurse. The call will be arranged by the insurance agent. The exam can be done almost anywhere, any time of day. They do their best to accommodate your busy schedule and keep you at ease. They may do things like take blood and urine samples, as well as ask medical history questions. This helps determine your risk to insure and the rates you will pay. Remember, they are agreeing to insure your life!
Once all the risks are assessed, the policy has been issued and sent to the agent, you have a chance to look at the policy and agree to its terms. If something is not to your satisfaction, you may cancel it before it begins, receiving your deposit back in full. It is important to remember that your insurance policy is a unilateral contract. That means you alone have the power to cancel or make certain changes to the policy after it is signed.
You now own an insurance policy on your life. The premiums will continue to be paid until the term is up, the policy is cancelled, or death occurs. Thinking about your death isn’t easy, but you can take comfort in knowing that, should you die, you and your insurance agent have intelligently assessed the financial risks and provided for the needs of your loved ones.