How to Buy Life Insurance Online in 3 Easy Steps

 

Life insurance is one of the most important financial products you can buy to protect yourself and your loved ones from financial hardship in case of your death. It can provide peace of mind, security, and income replacement for your family or beneficiaries.

However, buying life insurance can be a daunting and time-consuming task. You may have to deal with agents, medical exams, paperwork, and delays. You may also have to pay more than you need or get less than you expect.

That’s why buying life insurance online can be a convenient, fast, and easy alternative. You can compare quotes from different insurers, apply for and buy your policy online, and get coverage in minutes or days. You can also save money and get more choices and flexibility.

According to a 2021 study by LIMRA and Life Happens, 36% of Americans bought life insurance online in 2020, up from 29% in 2019. Moreover, 43% of online buyers said they saved money by buying online, compared to 32% of offline buyers.

If you are interested in buying life insurance online, this article is for you. We will explain how to buy life insurance online in 3 easy steps: determine how much and what type of life insurance you need, compare quotes from different insurers, and apply for and buy your policy online.

Step 1: Determine How Much and What Type of Life Insurance You Need

The first step to buying life insurance online is to determine how much and what type of life insurance you need. This will help you find the best coverage for your needs and budget.

How Much Life Insurance Do You Need?

The amount of life insurance you need depends on your income, expenses, debts, assets, dependents, financial goals, and other factors. The basic idea is to calculate how much money your family or beneficiaries would need to maintain their standard of living and achieve their objectives if you were no longer around.

There are different ways to estimate your life insurance needs, but here are some common methods or rules of thumb that you can use:

• Multiply your income by 10 or 10 plus college costs per child: This method estimates how much income you would earn over your remaining working years and multiplies it by a factor that accounts for inflation and interest. For example, if you are 40 years old and earn $50,000 per year, and you plan to work until 65, you could multiply your annual income by 10 to get $500,000 as your coverage amount. If you have two children who will attend college, you could add another $100,000 per child to get $700,000 as your coverage amount. This is a simple and popular method, but it does not consider your specific expenses or goals.
• Add up your debts and future expenses: This method calculates how much money you owe or anticipate owing for various financial obligations, such as mortgage, credit card debt, car loan, student loan, funeral costs, education costs, etc. For example, if you have $100,000 in debt, $200,000 in mortgage balance, and $100,000 in education costs for your children, you could add these amounts ($400,000) to get your coverage amount. This is a more detailed and customized method, but it may not account for future changes or contingencies.
• Use a life insurance calculator: This method uses an online tool that takes your personal and financial information into account and gives you an immediate result. For example, you can use this life insurance calculator by Forbes Advisor to estimate your life insurance needs. You just need to enter some basic data, such as your annual income, years of replacement income you may need, debts, savings, and other life insurance coverage—and you will get a result instantly. This is a more convenient and accurate method, but it may not capture all the nuances or variables of your situation.

Some tips or cautions to consider when estimating your coverage amount are:

• Do not buy too little or too much: If you buy too little coverage, you may leave your family or beneficiaries financially vulnerable in case of your death. If you buy too much coverage, you may waste money on premiums that you do not need. You should assess your needs regularly and use reliable methods or tools to calculate your coverage amount.
• Do not rely on employer-provided life insurance: Many employers offer group life insurance as a benefit to their employees, usually equal to one or two times their annual salary. However, this life insurance is not portable, meaning that you will lose it if you leave or lose your job. Therefore, you should not count on it as a reliable source of income for your family or beneficiaries.
• Do not count assets that are illiquid or earmarked for other purposes: Some assets may not be readily available or suitable to use for paying your financial obligations. For example, your home equity may be illiquid, meaning that you cannot access it unless you sell your home. Your 529 plan may be earmarked for your child’s education, meaning that you cannot use it for other expenses without incurring taxes or penalties. Therefore, you should not include these assets in your calculation.

What Type of Life Insurance Do You Need?

The type of life insurance you need depends on your goals, preferences, and budget. There are two main types of life insurance: term and permanent.

• Term life insurance: This type of life insurance provides coverage for a specific period of time, such as 10, 20, or 30 years. If you die within the policy term, your beneficiaries will receive the death benefit. If you outlive the policy term, your coverage will end and you will receive nothing. Term life insurance is usually cheaper than permanent life insurance for the same amount of coverage. It is suitable for people who only need temporary protection for a specific period of time, such as until their children become independent or their mortgage is paid off.
• Permanent life insurance: This type of life insurance provides coverage for your entire life, as long as you pay the premiums. It also has a cash value component that grows over time and can be accessed through loans or withdrawals. Permanent life insurance is usually more expensive than term life insurance for the same amount of coverage. It is suitable for people who need lifelong protection, cash value accumulation, and various investment options.

There are different types of permanent life insurance, such as whole, universal, variable, and indexed universal life insurance. Each one has its own features, benefits, and drawbacks. You can learn more about them in our guide on how to buy whole life insurance.

Some factors or questions to consider when choosing the type of life insurance are:

• How long do you need coverage? If you only need coverage for a specific period of time, term life insurance may be a better option for you. If you need coverage for your entire life, permanent life insurance may be a better option for you.
• How much can you afford? If you have a limited budget, term life insurance may be a better option for you. If you have more money to spend, permanent life insurance may be a better option for you.
• What features do you want? If you want a simple and straightforward policy that only pays a death benefit, term life insurance may be a better option for you. If you want a more complex and flexible policy that also has a cash value and investment options, permanent life insurance may be a better option for you.

Step 2: Compare Quotes from Different Insurers

The second step to buying life insurance online is to compare quotes from different insurers to find the best deal for your coverage.

The cost of life insurance depends on several factors that affect the risk of insuring you. The higher the risk, the higher the premium. Some of these factors are:

• Your age: The older you are, the more likely you are to die, and the more expensive your life insurance will be.
• Your health: The healthier you are, the less likely you are to die, and the cheaper your life insurance will be.
• Your lifestyle: The safer and cleaner your habits are, the less likely you are to die, and the cheaper your life insurance will be.
• Your occupation: The less dangerous or stressful your job is, the less likely you are to die, and the cheaper your life insurance will be.
• Your family history: The fewer genetic or hereditary diseases or conditions in your family, the less likely you are to die, and the cheaper your life insurance will be.
• Your type and amount of coverage: The longer and larger your coverage is, the more likely you are to die within the policy term, and the more expensive your life insurance will be.

The cost of life insurance also varies by insurer, as each one has its own underwriting criteria, pricing models, and discounts. Therefore, it is important to compare quotes from different insurers before buying a policy.

To compare quotes from different insurers, you can use online tools or brokers that can help you find the best deal for your coverage. You just need to enter some basic information about yourself and your desired coverage, and you will get multiple quotes from different insurers in minutes. You can then compare the prices, features, ratings, and reviews of each insurer and choose the one that suits your needs and budget.

Some tips or strategies to find affordable and suitable life insurance are:

• Shop around: Compare quotes from different insurers and use online tools or brokers to help you find the best deal. You may be surprised by how much prices can vary for the same type of coverage.
• Buy early: The younger and healthier you are, the cheaper your life insurance will be. Buying early can also lock in your rate and avoid future increases due to age or health issues.

• Choose term over permanent (if appropriate): Term life insurance is usually much cheaper than permanent life insurance for the same amount of coverage. If you only need temporary protection for a specific period of time, term life insurance may be a better option for you.
• Improve your health and habits: The healthier and safer you are, the cheaper your life insurance will be. You can lower your premiums by quitting smoking, losing weight, exercising regularly, eating well, managing your stress, and avoiding risky activities.
• Bundle with other policies (if available): Some insurers may offer discounts or incentives if you buy more than one policy from them, such as life, home, auto, or health insurance. This can save you money and simplify your payments and claims.
• Review your coverage periodically: Your life insurance needs and costs may change over time due to life events, such as marriage, divorce, birth, death, retirement, etc. You should review your coverage periodically and adjust it accordingly to avoid paying for too much or too little.

Step 3: Apply for and Buy Your Policy Online

The third step to buying life insurance online is to apply for and buy your policy online. This will require you to provide more information, undergo underwriting, and sign the policy documents.

Instant or Accelerated Underwriting vs. Traditional Underwriting

Underwriting is the process of evaluating your risk profile and determining your eligibility and premium for life insurance. Depending on the type and amount of coverage you want and the insurer you choose, you may have different underwriting options.

• Instant or accelerated underwriting: This is a fast and easy way to get approved for life insurance online without a medical exam or other cumbersome steps. It uses computer models and third-party databases to evaluate your application based on the information you provide and other sources, such as your credit report, driving record, prescription history, etc. If you qualify, you can get coverage in minutes or days. However, this option may not be available for everyone or for every type of coverage. It may also charge higher premiums than traditional underwriting for some applicants.
• Traditional underwriting: This is a more thorough and rigorous way to get approved for life insurance online or offline with a medical exam and other steps. It requires you to complete a paramed exam that involves blood and urine tests, blood pressure measurements, height and weight checks, etc. It may also require you to provide additional documents or information, such as medical records, financial statements, etc. It can take weeks or longer to get coverage. However, this option may be available for more applicants and more types of coverage. It may also charge lower premiums than instant or accelerated underwriting for some applicants.

How to Apply for and Buy Your Policy Online

To apply for and buy your policy online, you need to follow some steps or requirements, such as:

• Provide personal and financial information: You need to provide more details about yourself and your beneficiaries, such as your name, address, date of birth, social security number, email address, phone number, relationship status, occupation, income, assets, liabilities, etc. You also need to answer some questions about your health history and lifestyle habits, such as your height, weight, smoking status, alcohol consumption, medical conditions, medications, family history, hobbies, travel plans, etc.
• Allow insurers to review your history: You need to give permission to insurers to access your personal and financial records from various sources, such as credit bureaus, motor vehicle departments, medical information bureaus, prescription drug databases, etc. These records help insurers verify your identity, evaluate your risk profile, and determine your eligibility and premium for life insurance.
• Complete a paramed exam (if needed): If you choose traditional underwriting or if insurers request it based on your application or history, you need to complete a paramed exam that involves a physical examination and laboratory tests. You can schedule the exam at your home, office, or a nearby clinic at your convenience. The exam usually takes 15 to 30 minutes and is free of charge.
• Review and sign the policy documents: After insurers approve your application and issue your policy, you need to review the policy documents carefully and make sure they match your expectations and needs. You need to check the policy details and benefits, such as the coverage amount, premium amount, payment frequency, policy term, cash value (if any), riders (if any), etc. You also need to check the fine print and understand the exclusions, limitations, and conditions of the policy. If you are satisfied with the policy documents, you need to sign them electronically and return them to the insurer.
• Pay the premium: After you sign the policy documents, you need to pay the premium to activate your coverage. You can choose to pay the premium monthly, quarterly, semiannually, or annually. You can also choose to pay the premium by credit card, debit card, bank transfer, check, or money order. You should keep a record of your payment and policy number for future reference.

Some tips or cautions to consider when applying for and buying your policy online are:

• Read the fine print: Before you buy a policy online, you should read the fine print carefully and understand what you are getting and what you are not getting. You should look for any exclusions, limitations, or conditions that may affect your coverage or claim. You should also look for any fees, charges, or penalties that may apply to your policy. If you have any questions or doubts, you should contact the insurer or an agent for clarification.
• Check the insurer’s ratings and reviews: Before you buy a policy online, you should check the insurer’s ratings and reviews from independent sources, such as AM Best, J.D. Power, NAIC, BBB, etc. These ratings and reviews indicate the insurer’s financial strength, customer satisfaction, complaint ratio, reputation, etc. You should choose an insurer that has high ratings and positive reviews from reputable sources.
• Verify the policy details and benefits: After you buy a policy online, you should verify the policy details and benefits and make sure they match what you applied for and expected. You should check the coverage amount, premium amount, payment frequency, policy term, cash value (if any), riders (if any), etc. You should also check the beneficiary information and make sure it is correct and up to date. If you find any errors or discrepancies, you should contact the insurer or an agent immediately and request a correction.
• Update your beneficiaries regularly: After you buy a policy online, you should update your beneficiaries regularly and make sure they reflect your current wishes and circumstances. You should review your beneficiaries at least once a year or whenever you experience a major life event, such as marriage, divorce, birth, death, etc. You should also inform your beneficiaries about your policy and where to find it in case of your death.

Conclusion

Buying life insurance online can be a convenient, fast, and easy way to get coverage for yourself and your loved ones. You can compare quotes from different insurers, apply for and buy your policy online, and get coverage in minutes or days. You can also save money and get more choices and flexibility.

If you are ready to buy a life insurance policy online or review your existing one, we recommend that you use our online tools or brokers to compare quotes and buy a policy today.

Remember, life is unpredictable and precious. Don’t wait until it’s too late to protect yourself and your loved ones with life insurance.