How to Get Life Insurance

If you take care of other people, you’re probably used to what-ifs. Some of them are pretty easy to handle (“What if my kid leaves her lunch at home?” or “What if my baby gets spit-up all over my new shirt?”) and some of them are a bit more serious (“What will happen to my children or my aging parents if I were to pass away?”). 

Of course, even the serious what-ifs are handle-able if you have life insurance. If something were to happen to you, life insurance would give money to help your loved ones make ends meet, pay for college and other priorities.

Here’s your rundown on exactly how to get life insurance.

What Is Life Insurance? Why Does It Matter?

When you, the “policyholder," choose to get life insurance, the insurance company will make a lump sum payment (the “death benefit,” also referred to as the “coverage amount”) to your life insurance beneficiary when you die, as long as you make your monthly premium payments. 

"Your family will sacrifice enough not having you here. They shouldn’t have to sacrifice their lifestyle as well," says Ralph Gale, founder and president of FIREproof Wealth Management. 

Life insurance helps secure your family's financial future after you’ve passed away. There are many different ways to use a life insurance benefit, including: 

• Replace your lost income

• Make debt payments in your absence (such as for a mortgage or student loan debt)

• Pay for college tuition for a child

• Pay for childcare for younger children

• Support for aging parents

• Pay for one-time expense like funeral costs

Every family is different and every family has specific needs and reasons for getting life insurance. 

The death benefit is income-tax free, meaning that your beneficiaries generally wouldn’t owe taxes on the payout. 

Step 1: Figure Out If You Want Term or Whole Life Insurance

There are two main types of life insurance: term and whole life. They’re pretty different in both the features they offer, and how much they cost.

• Term life insurance provides a death benefit to your beneficiaries if you were to pass away while your policy is active or “in force.” For example, let's say you choose 20-year term life insurance. As long as you make your premium payments, your family will receive the payout if you die during the 20-year period.

• Whole life insurance, also called permanent life insurance, offers coverage for your entire life — just like it sounds. Whole life policies offer a death benefit but they can also build cash value over time. You can borrow against or withdraw from this cash value while you’re alive.

Whole life insurance policies tend to be more complex and much more expensive than term life. While whole life insurance does build cash value, fees and expenses can erode this cash value and affect benefit amounts.

Randy VanderVaate, president and owner of Funeral Funds of America, says, "Buying term or whole insurance will depend on your financial needs. If you are still young and want a large amount to cover your mortgage, school education for your children or lost income, it is advisable to get term life insurance. If you are 50 to 80 years old and you want life insurance to cover your final expenses, it is advisable to buy whole life insurance that will never expire and will be there when you need it the most."

Within these two broad categories, there are many different types of life insurance, which you can think of as various flavors of term and whole life.

Step 2: Decide on the Details of Your Policy

How much life insurance do you need? As you might imagine, this varies depending on your individual situation. 

Gale says, “A common thought pattern by some is that your need for life insurance lessens over time because you acquire wealth. However, the need to provide for the future never lessens.”

One simple way to estimate your coverage is to take your annual salary and multiply it by five or 10. If you want a more precise approach, add up your debt and expenses (including your mortgage) and determine how many years of financial support your beneficiaries would need. Include one-time costs like final expenses and debt repayment. Make sure to include the cost of your kids’ education, or however much you would want to contribute toward tuition.

Then, subtract your assets, such as the amount you already have invested or in savings. That will give you a more in-depth picture of how much coverage you need and how long you'll need it.

At this stage, you should also make sure you know who you want to designate as your beneficiary. That’s the person who would receive the money from the policy if something were to happen to you. You can usually designate a contingent beneficiary as well, or someone who would receive the death benefit if your first beneficiary isn’t available for some reason.

Step 3: Get a Sense of What It Might Cost

Use Fabric's life insurance quote estimator to determine how much life insurance might cost for you. Input your age, gender, state, whether you use tobacco and your general level of health. Next, you can choose how much coverage you want and the policy length. You'll get a quote in seconds. 

For example, let's say you're a 30-year-old male from Illinois in excellent health who doesn't use tobacco. A policy for $250,000 in coverage over a 20-year term would cost $20.27 per month.

A 40-year-old female from California in excellent health who doesn't use tobacco would pay $50.36 per month for $1 million in coverage over 15 years. 

Step 4: Fill Out the Life Insurance Application

Next, you'll fill out an application. If you apply through Fabric, you can submit the entire questionnaire online and may be approved right away.

A typical life insurance application asks about: 

• Your age

• The state in which you live

• Lifestyle questions related to the risks you face in your everyday life, such as extreme sports, travel or tobacco use

• Your gender

• Your current height and weight

• Screening for specific diseases

• Your insurance application history

• Work questions

• Your current insurance

• About your identity 

• Your beneficiaries

Some professions might make you harder to insure, so your individual situation may vary. For example, members of the military might benefit from life insurance policies specifically targeted toward them, since they work a high-risk job. Military spouses, on the other hand, might choose to get life insurance through a more mainstream company.

Step 5: You Could Be Approved on the Spot

If you choose to apply for life insurance available without a medical exam, you'll find a few major benefits: It's convenient, speedy and often requires no waiting period for coverage. 

Some types of insurance never require a health exam, although these may be much more expensive and include lower coverage amounts (this includes simplified issue and guaranteed issue life insurance). Accelerated underwriting, however, means you may be able to get coverage through a medically underwritten policy without taking an exam. If so, you’d receive the same kinds of rates and coverage limits as people who did take an exam. 

It’s worth noting that not everyone qualifies for accelerated underwriting. For example, at Fabric most applicants don’t end up needing to take a health exam, but some do. 

Step 6: Otherwise, Answer Follow-Ups

In some cases, underwriters (the people who review your application and determine your risk levels) may have follow-up questions for you. Answering them promptly will help you get an offer more quickly. This could include questions about your prescription history, requests for records from your doctor’s office and more. 

In some cases, you may need to take a health exam for your life insurance policy. This will likely involve taking your height and weight, blood pressure, blood sample and urinalysis. Typically, a qualified medical examiner will come to your home or office at a time you choose—with Fabric, you can schedule anywhere that’s convenient for you, at any time, for free. That includes nights and weekends. 

All information obtained during the exam will be strictly confidential and your test results will be sent only to the underwriting department to be used in the underwriting process.

Step 7: Accept the Offer and Pay Your First Premium

Once your first payment is received, your policy is active. That means that your family will be protected from then until the end of your term length, as long as you stay up to date on your monthly premiums. Some experts recommending checking in once a year to make sure your coverage still fits your needs, as well.

Insurance can’t erase all of life’s what-ifs (“what if I get my kid the strawberry ice cream like she wanted, but then she cries for chocolate?”). But planning ahead can alleviate the most important unknowns, leaving you to the smaller unknowns that keep life exciting (and messy).

Fabric exists to help young families master their money. Our articles abide by strict editorial standards. This article has been reviewed and approved by a compliance professional who is a licensed life insurance agent.

Information provided is general and educational in nature, is not financial advice, and all products or services discussed may not be offered by Fabric by Gerber Life  (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Consult an attorney or tax advisor regarding your specific legal or tax situation. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. The views and opinions of third-party content providers are solely those of the author and not Fabric by Gerber Life.