Life insurance provides your spouse, children, and other family members with a financial safety net in the event of your death. Purchasing a life insurance policy is not always a priority, in part because most people dislike contemplating their own mortality. Whether you're just curious, seeking information, or ready to enroll, here's how to purchase the necessary life insurance.
• Life insurance can be a crucial component of your overall financial strategy.
• The primary objective of life insurance is to help your dependents replace your income in the event of your death.
• You can purchase life insurance directly from an insurance company or through a broker or agent.
• The COVID-19 crisis has altered some insurers' business practices.
How and Where to Buy Life Insurance Policy
Purchasing life insurance is not a one-size-fits-all endeavor. You must determine the type, duration, and amount of coverage you require. For instance, you could purchase a 20-year term life insurance policy with a $500,000 death benefit.
Obviously, you must also decide where to purchase it. There are four general sources for life insurance:
1. from a life insurance company directly
2. According to a life insurance agent
3. From the life insurance broker
4. Online Life Insurance Purchasing
Generally, you can purchase a direct term policy if you wish to go directly through an insurance company. This type of policy satisfies your insurance needs for a predetermined time period, such as 10, 20, or 30 years.
Typically, you fill out an online application, compare your price quotes, select a policy, and pay for this type of insurance. You may have the option to purchase a guaranteed issue policy that does not require a medical exam, depending on the insurer. A guaranteed issue policy is a viable option for individuals with health issues who would otherwise have difficulty acquiring life insurance.
Choosing a direct term policy is a quick way to purchase coverage, particularly if you already know the exact type of coverage you need (and it happens to be something that the company offers). However, if you require assistance, have questions, or desire more options, you should likely work with an agent or broker.
Buying Via a Life Insurance Agent
Most life insurance policies are sold by agents or brokers. Both serve as middlemen between insurance companies and insurance purchasers. And both must be licenced to sell insurance products in the states in which they operate. Despite the fact that both terms are frequently used interchangeably, there are distinct distinctions between them.
The most important distinction is who the individual represents. An insurance company appoints an agent to sell its products. A captive agent is a representative of a single insurance company, whereas an independent agent is affiliated with multiple insurers. Life insurance agents represent the companies, not the buyers. Their objective is to sell you coverage from the companies they represent, which may or may not match your requirements.
Buying Via a Life Insurance Broker
In contrast, brokers represent insurance purchasers, not companies. They operate independently and have no contracts with specific insurance providers. Therefore, they should be able to provide unbiased recommendations that meet the needs of each customer. Typically, brokers collaborate with numerous insurance providers to offer clients a selection of price quotes and plans.
Permanent life insurance, which combines life insurance coverage with an investment account, is more expensive and difficult to acquire than term life insurance.
Buying Online or In-Person
If you choose to work with an agent or broker as opposed to going directly through an insurance company, you must also decide whether to shop locally or online.
If you want personalized advice, are considering permanent life insurance rather than term life insurance, or have a complicated situation, a local insurance agent or broker is a good option. Also, a broker or agent can be a good option for those who are not particularly tech-savvy and would have difficulty navigating an online application.
If you have a general idea of your coverage needs, desire a term life policy, or prefer to shop independently, an online agent or broker may be a better fit. There are also a large number of websites that compare quotes from multiple insurance providers.
Common Life Insurance Qualifications
Numerous life insurance agents and brokers are accredited by industry organizations, such as The American College of Financial Services and The Institutes (formerly the Insurance Institute of America), as evidence of their expertise.
• CFP (certified financial planner)
• ChFC (chartered financial consultant)
• CLU (chartered life underwriter)
• FSCP (financial services certified professional (this designation replaced LUTCF, or "life underwriter training council fellow"))
If an agent or broker with whom you're considering working has a designation (or multiple designations) that you don't understand, you should inquire as to what the acronym stands for, which organization issued it, and how it was earned.
Buying a Life Insurance During COVID-19
The COVID-19 pandemic has presented the life insurance industry with new challenges. First, it is difficult, if not impossible, to conduct in-person physical exams when individuals are expected to be socially distant. Nonetheless, life insurance companies are open for business, accepting applications and adapting client on boarding procedures to the shifting environment.
As an alternative to sending a paramedical professional to your home or place of business, certain insurers now evaluate medical records, prescription history, and similar information. Others have extended the time allotted to complete a conventional exam while providing temporary, interim coverage. Additionally, you can communicate with agents via phone or video conference and electronically sign any documents.
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