Life Insurance Deep Dive Part III – Process
After we discussed the different insurance products and their uses it is time to look into the process you should be aware of once you decide you would like to purchase a life insurance for yourself.
Usually, a traditional insurer will introduce an agent who will discuss with you your needs and desires and will provide a couple of options for life insurance products and quotes. He will most probably explain that the premium you shall pay depends on the rating you will get during the underwriting process. And during this process the insurer will look into your medical records, life habits and others to determine how risky it is to sign an insurance contract with you. It is not hard to estimate a quote before the underwriting but only after the insurer completes it you will know for certain what the premium payments are. A more contemporary insurers might do the initial interview on the phone or online to save some costs from the process.
Once you are ready with your decision the agent will assist you to fill out a comprehensive application for insurance that includes general information about you, medical information, beneficiary information and anything else they might need in order to process your application. Remember that you are applying for the insurance so it is a one side contract so far. The insurer still needs to go through underwriting and approve your application. Only if you pay an estimate of your first premium payment then you will have a partial commitment from the insurer. If something happens before you are approved for the insurance contract the insurer is still going to fulfill the claim but may do so using different rating that applied for.
The underwriting process is critical for the insurer to decide which risk category you should be allocated to so several additional steps might be needed. Attending Physical Statement is often needed when the death benefit is above a specific threshold (e.g. 500K). Also the insurer will most probably run an investigative consumer report for you. Additional medical examinations, blood work and lab tests including HIV are all fair game that you might encounter during the underwriting.
After the insurance company has all the information they need to make a decision on your application it will provide you with your insurance contract during the delivery. The contract shall state the rating you are insured at, the premium payment mode and the payment amount. The ratings can be standard, preferred or if the insurance company decides you are uninsurable they might decline to issue you the life insurance contract and will return all the money you have submitted.
The premium payment amount depends on the frequency of payment. If you decide you would like to make monthly payment instead of annual premium payment, the insurer will ask for a larger premium to cover the expenses for administering more than 1 payment a year.
At the time of contract delivery your insurance contract may be already in effect depending on when your first premium was collected. If you have provided it with the application the effective date of the insurance contract will be the application date.
I hope all the posts regarding life insurance will help you navigate the thought process about life insurance and finding the right company and product if you decide you need insurance for yourself.
Good luck with your search.