There are some purchases that leave you with a warm, fuzzy feeling inside. An engagement ring often falls into that category, or the first piece of furniture for your new nursery. Life insurance really should be the same, given that it's intended to protect your loved ones in case the worst should happen. In practice, it's an uncomfortable reminder of mortality for a lot of buyers -- an irrevocable step into the ranks of the grown-ups. However difficult it can be psychologically, the actual steps involved in getting insurance are straightforward.
Determining Your Needs
Before you pick up the phone and start calling insurance brokers, sit down and think seriously about what your goals are. Couples with young kids have big needs. You'd probably want to support your surviving spouse to some extent, cover the costs of additional child care and ensure your kids have an education. Your insurance should also pay for funeral expenses, estate taxes and your outstanding debts. Allow funds for your spouse's retirement investments, as well. Bereavement now shouldn't lead to hardship later.
Once you've added up how much money it will take to meet these goals -- be warned, you might need a drink -- it's time to see how much the coverage will cost you. There are several online comparison tools that will give you rates from dozens of companies for comparable products. Weed out the companies you've never heard of, and pick a handful of reputable firms to follow up with. Large quantities of term coverage are surprisingly inexpensive when you're young and healthy. This is the basic form of life insurance, providing a death benefit for a set period but no investment value.
Application and Underwriting
Once you've interviewed a few brokers and selected a policy, it's time to begin the application process. The forms will usually include a number of questions about your personal medical history, and your family's history. Be truthful: it might cost you a little more in premiums, but it's better than losing your coverage if the insurer finds out. The insurer's underwriting department will review your file and decide what degree of risk you represent. Depending on the size of the death benefit you've applied for, the insurer might request blood tests or a full physical workup.
If you've had a serious illness such as cancer, it may be difficult to get coverage. Most companies offer "guaranteed issue" policies, which don't ask any health questions. Unfortunately, they combine high premiums with low benefits. Other products provide more favorable terms in exchange for a moderate degree of screening, usually to establish that you don't have a life-threatening illness when you apply. If you're a temporarily poor risk because of lifestyle factors such as high weight, poor fitness or smoking, take a few years to correct those issues and then reapply. You should be able to get a much-improved rate.
Fred Decker is a trained chef and certified food-safety trainer. Decker wrote for the Saint John, New Brunswick Telegraph-Journal, and has been published in Canada's Hospitality and Foodservice magazine. He's held positions selling computers, insurance and mutual funds, and was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.