Get Life Insurance Fast: A Quick Guide

Life insurance is a contract between an insurance company and a policy owner in which the insurer guarantees to pay a sum of money to one or more named beneficiaries when the insured person dies. The policyholder must pay a single premium upfront or pay regular premiums over time for the life insurance policy to remain in force.

There are two primary types of life insurance: term life insurance and permanent life insurance. Term life insurance is generally the cheapest kind of life insurance. It provides coverage over a specific term period, usually between 10 and 30 years. Permanent life insurance is more expensive than term life because of the coverage length, cash value and policy charges. It also offers a guaranteed death benefit, or a sum of money given to your beneficiaries if you die during the policy term.

Assess your need for life insurance

Before purchasing life insurance, it's important to assess your need for it. This involves considering the financial impact your death would have on your dependents. Ask yourself: What would life look like for them without your income? Will they have the financial resources to cover your end-of-life expenses? Will they be left with a mountain of debt?

Next, evaluate the resources you currently have in place to support your dependents, such as an emergency fund, retirement savings, and any existing life insurance coverage. If there is a gap between what you have and what your loved ones would need to maintain their standard of living, then you should consider purchasing life insurance.

It's recommended to work with a financial planner to discuss the specific needs you should cover with life insurance. This could include a mortgage that needs to be paid, children who need financial support, a small business that needs to be maintained, or a legacy you want to leave behind.

Calculate how much coverage you need

When calculating how much life insurance coverage you need, it's important to consider your financial situation and the needs of your dependents or beneficiaries. Here are some factors to take into account:

• Income replacement: Consider how much money your dependents would need to maintain their standard of living if they were to lose your income. This includes thinking about any financial goals you have, such as saving for your children's education or supporting a spouse or partner. A common rule of thumb is to have a policy with a death benefit equal to 10 times your annual salary, but this may vary depending on your specific situation.
• Debts and expenses: Calculate any debts or expenses that your life insurance policy would need to cover, such as mortgage payments, credit card debt, college tuition fees, and funeral expenses.
• Future expenses: If you have children, factor in the costs of raising them until they become financially independent. Also, consider any future expenses that your spouse or dependents may incur, such as medical bills or education costs.
• Existing resources: Take into account any existing resources that could support your dependents in your absence, such as an emergency fund or retirement savings.
• Financial goals: Think about how your death might impact your ability to meet your financial goals, such as saving for retirement or paying off debts.
• Life insurance calculator: As a starting point, you can use an online life insurance calculator to get an estimate of the coverage you may need.
• Financial planner: For a more precise figure, it's recommended to consult a financial planner or advisor who can help you develop a coverage amount that aligns with your financial goals and circumstances.

Decide on the life insurance policy type

There are two main types of life insurance: term and permanent. Within permanent insurance, the two primary types are whole life insurance and universal life insurance. Term life insurance is usually less expensive with fewer benefits, while permanent life insurance is typically more expensive as it offers more benefits. Here is a closer look at what these policies cover and how they work:

Term Life Insurance

Term life insurance is generally the cheapest kind of life insurance. It provides coverage over a specific term period, usually between 10 and 30 years. If you pass away during the term, your beneficiaries will receive a payout from the insurance company. Once the term is over, the benefits end unless the policy is renewable or convertible, which is offered by many insurers. It is important to note that your premium will likely increase if you choose to renew or convert.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that provides lifetime protection as long as you continue to pay the premium, with fixed premiums and cash value. With some whole life policies, policyholders have to pay their premium until they die, and other policies only require a premium for a certain number of years (although these premiums are much higher compared to the lifelong premiums).

Universal Life Insurance

Universal life is another type of permanent coverage. It also accumulates cash value, but the policy is flexible to allow you to change your death benefit and premium to fit your changing needs. There are several forms of universal life insurance, including variable universal life insurance and indexed universal life insurance.

Before you buy life insurance, you may want to do more research to find out which option will best meet your needs.

Determine if life insurance riders are necessary

Riders are add-ons to a life insurance policy that provide additional coverage or benefits. They are designed to help you personalise your policy to fit your needs and the needs of your loved ones. Riders are most commonly associated with permanent life insurance policies, but many insurers allow you to add them to term policies as well.

The availability of riders depends on your insurer and the policy you've chosen. You'll need to opt into riders when you buy your policy—you generally can't add them later. Some riders are included at no charge, while others might raise your rate.

• Accelerated death benefit rider: Allows you to access part or all of the policy's death benefit while you're still alive if you have a terminal illness.
• Accidental death rider: Increases the payout to your beneficiaries if you die from a covered accident.
• Child term rider: Covers your children on your policy, paying a small death benefit if a child dies before reaching maturity.
• Guaranteed insurability rider: Allows you to purchase additional insurance coverage in the stated period without the need for a medical examination.
• Long-term care rider: Allows you to access your life insurance death benefit while you're still alive if you have a chronic illness and are unable to complete daily living tasks.
• Return-of-premium rider: Refunds some or all of your premium payments if you outlive your term life insurance policy.
• Waiver of premium rider: Pays your life insurance premiums if you become totally disabled and can't work.

Other types of riders include chronic illness riders, cost-of-living riders, critical illness riders, disability income riders, family income benefit riders, guaranteed renewability riders, paid-up additions, spousal insurance riders, and term conversion riders.

When deciding whether to add riders to your life insurance policy, consider your future financial needs. For example, you might want funds to manage a chronic illness or coverage for your spouse or child. If you don't expect to use certain features or benefits provided by a rider, it might be an unnecessary expense that increases your insurance premiums.

Understand what factors affect your life insurance rates

Several factors affect your life insurance rates. Understanding these factors can help you manage the cost. Here are the key considerations:

Age

Age is one of the most significant factors in determining your premium cost. The younger you are, the lower your payments will be. Life insurance policies are less expensive for younger individuals with longer life expectancies and a lower likelihood of illness. The cost of a life insurance premium increases by an average of 8% to 10% for every year of age. Thus, the longer you wait to buy life insurance, the more you will have to pay for premiums. Applying for life insurance at a younger age can help you save money.

Gender

Gender is also a key factor in determining life insurance rates. On average, women live longer than men, resulting in lower rates for women. Men generally have shorter life expectancies and, therefore, pay higher premiums.

Smoking Status

Smoking significantly impacts life insurance rates. Smokers pay substantially higher premiums than non-smokers, often more than double. Insurance companies consider any form of nicotine use, including cigarettes, cigars, pipes, chewing tobacco, nicotine patches, e-cigarettes, and vaping, when determining rates. It is important to note that if you start smoking after purchasing life insurance, your rates will not increase; however, lying about smoking habits on your application may result in policy cancellation.

Health

Your overall health plays a crucial role in determining life insurance rates. The underwriting process typically includes a medical exam that assesses vital metrics such as height, weight, blood pressure, and cholesterol. Managing serious conditions like high cholesterol and diabetes before applying for coverage can help ensure a competitive rate. Addressing controllable health conditions and making positive lifestyle changes can also help lower your premiums.

Family Medical History

Your family's medical history can influence your life insurance rates. A history of stroke, cancer, or other serious medical conditions in your family may indicate a higher risk of developing these ailments, resulting in higher premiums. Life insurance companies are particularly interested in conditions that have contributed to premature deaths among your parents or siblings.

Lifestyle and Occupation

Your lifestyle and occupation can also affect your life insurance rates. If you engage in high-risk activities or have a dangerous profession, you may be subject to higher premiums. Examples of risky hobbies include motorsport, scuba diving, skydiving, and piloting planes. Occupations with numerous occupational hazards can also result in increased costs.

Driving Record

Your driving record is another factor considered by life insurance companies. A history of driving infractions, such as DUIs, reckless driving convictions, or suspended licenses, can lead to higher rates. Additionally, a criminal record, including felonies and major convictions, may impact your eligibility and result in higher premiums or even application denial.

Coverage Length and Amount

The type of policy, coverage length, and amount will also influence your life insurance rates. Term life insurance is generally the cheapest option, while universal life costs more, and whole life insurance is the most expensive. The longer the policy term and the higher the coverage amount, the greater the premium will be, as the insurer takes on more risk.

Frequently asked questions