Last posted at massmutual.com
Buying life insurance isn’t nearly as complicated, time-consuming – or even scary – as some might believe.
It’s true: there are a myriad of life insurance options out there from whole life to term to universal life insurance , but that doesn’t have to make the decision daunting because you’ll have a financial professional with you every step of the way providing guidance and transparency into the decision-making and buying process.
Buying Life Insurance: Step-by-Step
Set the Groundwork with Your Financial Professional: The first meeting with your financial professional will focus on understanding the things that are most important to you. That includes your goals, your dreams, and even what’s keeping you up at night. This will help your financial professional determine what type of life insurance best meets your needs and budget, and how much life insurance coverage you should consider given your current financial situation. You can prepare for this meeting by compiling a list of some key financial information including any life insurance policies you currently own:
• Your savings: This includes how much you have saved in different accounts (savings account, checking account, investments, and retirement plans such as 401(k) or individual retirement account).
• Your income: Your annual salary, including bonuses and other sources of income such as rental property income.
• Your debts or payments: This includes, but is not limited to, your mortgage, student loans and credit card debts, as well as regular payments such as health, automotive, and home or renter’s insurances.
It’s important to note that when you complete an application for insurance to make sure the information you provide is truthful and as accurate as possible.
Understanding the Cost of Life Insurance: The actual cost of insurance is based on a number of factors, some of which include your current health (weight, blood pressure, cholesterol, diabetes, etc.); your medical history (cancer, heart attack, etc.); tobacco use, alcohol and drug abuse history; personal hobbies and occupations (aviation, auto racing, or skydiving).
Completing a Medical Exam: You will likely need to complete a basic medical exam. This process is not to be feared, nor will it take a lot of time; the medical exam can often even be conducted in the comfort of your own home.
The medical exam will generally include height and weight measurement; blood pressure reading; and a blood and urine test. It’s typically a fasting blood test (you can’t eat beforehand) so you should consider scheduling the exam first thing in the morning.
You can better prepare for the medical exam by making a list of the name(s) of your medical provider(s) and their address(es) as you’ll likely be asked this information on your application or during your medical test. In some cases, you might be asked to provide additional medical records and/or participate in a phone interview to verify or clarify information in your application or about your health.
Understanding Your Risk Class: As the insurance company reviews your application and health assessment, you’ll be matched to a “risk class”, which factors in to how much you will actually pay for life insurance coverage. The most common risk classes are:
• Preferred: Lowest risk – pays the lowest rate
• Standard: Average risk – pays the standard rate
• Substandard: Higher than average risk – pays a higher rate
Receiving Your Life Insurance Quote: At the time that you complete your application, your financial professional will provide you with an initial quote, which is an estimate of what you might pay for insurance coverage. All aspects of your application package are treated as highly confidential.
You are under no financial obligation to buy a life insurance policy, even after your application for a policy is approved. Even after you’ve purchased a policy, you generally have 10 days to reconsider and get a refund (the time depends on which state you live in). This is typically referred to as a “free look”.
Understanding the Main Types of Life Insurance Policies
Whole life insurance policies provide permanent death benefit protection and accumulate guaranteed cash value over time. That cash value can be used as a source of funding in the future for things like college tuition or supplemental retirement funds. However, tapping into the cash value will reduce the death benefit, increase the chance the policy will lapse, and possibly result in a tax bill should the policy terminate before the death of the insured.
Participating whole life insurance policyowners are eligible to receive dividends, which are not guaranteed. Massachusetts Mutual Life Insurance Company has paid dividends to participating whole life policyowners consistently since the 1860’s. They may choose to receive their dividends in cash, or through an alternate dividend option such as paid-up additional life insurance.
Universal life insurance provides permanent life insurance coverage to give your loved ones the financial security they deserve. It provides a death benefit that can be guaranteed for an affordable premium and the ability to accumulate account value. Similar to whole life insurance, you can borrow from any accumulated account value to fund things like college or supplement your retirement income.
Term life insurance policies are also available. These policies tend to be more affordable for some people and provide insurance for a specified period of time, such as 10 or 20 years. Some policies can be converted to a permanent type of life insurance at a later date. The death benefit is guaranteed for the term stated in the policy as long as you keep up with your premiums.
The kind of insurance that’s appropriate for you depends on your individual circumstances and that’s why many people opt to consult a financial professional. Get started and find a financial professional in your area today.