The 4-Step Guide to Buying Life Insurance for the First Time
Because it's better to have a policy than not.
Welcome to #Adulting, the ultimate breakdown of all your grown-up needs. These articles are here to help you feel less alone and answer all your personal, financial, and career questions that weren’t answered in school (no judgment, we get it!). Whether you’re looking to find out how to tackle laundry or you want a deep breakdown on how to make a savings plan—we’ve got you covered. Come back every month to find out what life skills we’re upgrading next and how.
Life insurance feels like one of those “adult” things you don’t have to think about until you’re much older, just like retirement plans and mortgages. But with the coronavirus (COVID-19) pandemic continuing on across the U.S., you might start wondering how to sign up for life insurance now.
It sounds creepy (and kind of depressing), but basically, life insurance is “defined as a ‘tax-free lump sum [that’s] paid out to your family when you die,’” Isabella Fitzgerald, a life insurance expert at Lion.ie, tells HelloGiggles. There are two types of life insurances you can get: One is called permanent life insurance, which provides you coverage for the rest of your life, and the other is called term life insurance, which provides coverage for a set period of time during your life (these usually have durations of 10, 15, 20, or 30 years). Once you buy the policy you want for you and your family, the recipients can “use the policy payout to replace the income they lose on your death so they can avoid financial worries at a time of great emotional distress,” Fitzgerald adds.
She says it’s a good idea to consider getting life insurance once you start amassing your own wealth—pandemic or no pandemic—which typically starts happening for people in their 20s and 30s. And the good news, Fitzgerald says, is “the steps towards getting life insurance are not as daunting as they may seem at first,” so long as you take them one step at a time. “I find that can take a lot of the stress out of the situation for younger folks, new parents, and first-time property buyers who suddenly have a heap of ‘adult-y’ decisions to make!”
Whether you’ve just experienced a major life event or are simply interested in learning how to sign up for life insurance in general, here’s a quick guide to getting life insurance.
Step One: Get a quote
The first step is to get a quote from a certified and fully qualified broker, Fitzgerald says. You can find one near you with a quick search online, at which point you’ll make an appointment to chat.
What does this person do? “Brokers get the best deals from the various life insurance providers in your area and don’t get paid any commission from your fee—only by the insurance agency. So it always pays to let a broker shop around and do the heavy lifting for you,” she says.
You aren’t under any obligation to buy life insurance after getting a quote; this is more about seeing all your options. “Most brokers have handy online calculation tools whereby you enter your details and their algorithm automatically scours the various insurers for the best possible deal,” Fitzgerald says.
However, if you prefer to do things on your own, you can still buy life insurance directly through an insurance company.
Step Two: Decide how much coverage you need
Part of this process will include deciding how much coverage you need. To do so, you should evaluate your debt, Melanie Musson, an insurance expert with the life insurance site QuickQuote, tells HelloGiggles. “Get enough to cover that,” she explains.
Then, evaluate how much you want your family to be provided for. If you have kids or are thinking about having kids, do you want their college tuition covered? Or do you want a certain amount of money just to cover your funeral? “Once you get a basic idea of how much coverage you need, you’re ready for the next step,” Musson says.
Step Three: Choose an insurer
Just like with car insurance, you’ll get a few quotes from various companies. From there, all you need to do is pick the one that seems like the best fit for you.
As Fitzgerald says, “Different insurance firms offer different rates, benefits, [and] have different clauses and customer service levels, so choose wisely.” Again, just like with car insurance, you might not want to go with the cheapest one. But it isn’t necessary to go overboard, either, especially when you’re young.
If you’re having trouble deciding, you can read reviews. “You want a company that has good customer reviews and good financial standing,” Musson says. “Once you choose a company, talk to one of their agents. That person can help you go over your needs to make sure you have a sufficient policy.”
Step Four: Complete your application
Once you choose an insurance company, you’ll fill out a form. “Most online (and offline) application forms are composed of three main sections,” Fitzgerald says, “which you’ll need to get insured.”
These include your personal details (i.e. your contact name; address; lifestyle habits, like whether you smoke; and occupation), your medical information (i.e. general questions about your health), and lifestyle activities (i.e. whether you have hazardous hobbies, play extreme sports, etc.) This is so the company can assess your risk.
It might seem a little too real to get life insurance, especially when you’re young. But if you have some personal wealth and/or a family to think about, it very well may be worth it.