Life insurance is available through more channels than one would think. It is generally available through:
Your employer: Many companies provide their employees with life insurance free of charge. The advantages are there's no cost to you and it is often cheaper to join a group life insurance. However, employers usually offer term insurance with all of its drawbacks. Some states require that your employer let you "carry" your insurance with you if you leave the company.
Agent or broker: Traditionally insurance is sold through an agent or broker, who will generally charge a commission, which is sometimes called a "load."
Insurance company: Some companies allow you to buy insurance directly by phone, mail, or the Internet. These policies often don't incur commissions. The downside is that they're harder to find and require more legwork than if you were to use an agent.
Savings bank: In some states, savings banks sell life-insurance policies.
Steps to purchase life insurance
The life insurance buying process might not be clear at all with the different coverage and insurance payout amounts. If you are in the process of looking for life insurance and are lost, the following steps should guide you:
Decide whether you want term life insurance or whole life insurance. Term life insurance is usually cheaper and more suitable for most people. To understand the difference between the two types of insurance, read the article Types of Life Insurance Policies.
Determine how much coverage you need. Buy enough term coverage to fill your needs. You may need enough insurance to cover anywhere from five to ten years of your salary. You need to consider whether you have other assets and whether your children will be to leave the nest and care for themselves soon. How much coverage you need also depends on what you own and owe. There is an useful, simple formula for determining how much insurance you need:
Short Term Needs
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Long Term Needs
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Family Maintenance Expenses
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Resources
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Amount of Life Insurance You Need
Short term needs - final expenses, outstanding debts and emergency expenses. Among final expenses are medical, hospital, and funeral expenses, attorney or executor fees, probate court costs (if you do not have a will), and any outstanding taxes that would need to be paid if you died. Among outstanding debts are credit card balances, auto loans, college loans, and all other outstanding bills. Emergency expenses should include a cash reserve for medical emergencies and repairs to your home or car.
Long term needs - your mortgage and dependents’ college tuitions.
Family maintenance expenses – necessities such as childcare, food, clothing, utility bills, entertainment, travel, and transportation. Calculate this figure based on a year's worth of expenses, then multiply that times the number of years you want to provide this income.
Resources - all available savings, stocks, bonds, mutual funds, existing life insurance, and Social Security.
You will also need to know how much coverage you need in terms of future value. This would tell you how much insurance you need after you take into account inflation.
Match the term of the policy to you or your dependents’ needs. You would want the policy to last as long as it takes your dependents to get on their feet, or long enough to cover your retirement. You will need to estimate when your children will be own their own and no longer in need of your financial support. For example, if your youngest child is 5 years old, you may want a policy that covers you until your youngest child is at least 22 years old.
Look up quotes online or ask family members, friends, and coworkers for recommendations. After getting recommendations, you can call the insurance agency and ask for a quote. When shopping for life insurance online, the key is to look at prices and at a company’s ratings. What you should be looking for is a company with top ratings, low prices, and the term you want. Standard & Poor’s and A.M. Best provide ratings on insurance companies. You can also contact your state's department of insurance to find out more about an insurer's record.
Submit an application. The life insurance application usually asks you about your current and past healthy history and lifestyle. You will be required to take a medical exam, which will be paid for and arranged by the insurance company. The information you provide on your application, the health exam, and your past health history will determine whether or not you will be offered a policy, and if so, at what price.
Make sure you understand everything in your policy. Know your policy provisions, the amount of benefits, the premium, and other charges you’ll pay. Under state law, you may have a “look policy,” which is a period of time when you can terminate your policy without penalty (usually lasting 10 days).
Check the life insurance policy periodically. For every 3 to 5 years, it is a good idea to see whether you need to adjust the coverage to accommodate you and your beneficiaries’ ever-changing financial needs.
Your employer: Many companies provide their employees with life insurance free of charge. The advantages are there's no cost to you and it is often cheaper to join a group life insurance. However, employers usually offer term insurance with all of its drawbacks. Some states require that your employer let you "carry" your insurance with you if you leave the company.
Match the term of the policy to you or your dependents’ needs. You would want the policy to last as long as it takes your dependents to get on their feet, or long enough to cover your retirement. You will need to estimate when your children will be own their own and no longer in need of your financial support. For example, if your youngest child is 5 years old, you may want a policy that covers you until your youngest child is at least 22 years old.