Updated: Feb 3
Ever since I started in the life insurance industry I have noticed that generally, people don't understand the process of starting their financial plan or how to go about purchasing life insurance.
This explains why many wait until their mid 30's to purchase insurance. The easiest way to tackle this problem is to explain it step by step.
1. Do your research and find an advisor
This first step is crucial. Trusting your advisor is huge and will ultimately determine how comfortable and secure you are with your policy. Finding an advisor can be as simple as asking your friends who they've used, or googling about licensed advisors in your area.
2. Discovery Session (Consultation)
Yay! You've found a great advisor that you trust and are comfortable with. Now it's time to meet with them to discuss your needs.
In this first meeting you, and your advisor will walk through a few scenarios, you will be asked a few questions, and you will have the chance to go through your agenda as well. Remember, you're interviewing this advisor as well.
The purpose of this meeting is to get to know each other, and to pinpoint the areas that need to be protected.
As much as this is a qualitative meeting, money will come into play here.
You will most likely fill out a 'Needs Analysis' together. This is meant to establish the amount of capital you would require a policy to have for you to feel comfortable today, and tomorrow.
2. Market Research
Once your advisor has gathered enough information from you, they will take it to the market to find you the best product.
The purpose of your second meeting is to go over the recommendations from your advisor. Often, she/he will present 2 different products that fit your needs.
You will have the opportunity to learn about what these options have to offer you.
If neither of these options seem like the right choice, you and your advisor will continue with the initial discovery discussion to ensure your needs are fully understood.
4. Application Process
Once you have chosen a solution, your advisor will walk you through the application process. This step takes anywhere from 30 minutes to 90 minutes. Make sure you come prepared to spend that amount of time on the application.
This process requires you to dive into your financials, medical history, activities, hobbies, etc.
No need to worry though, everything is 100% confidential.
Once your application has been submitted, it will be sent to the insurance company (underwriting team). This is where they begin the process of assessing your risk.
In order for the company to come to a decision, they may need additional information from you. This could include:
These are normal procedures put in place by the insurance company. It is meant to make sure you are not underinsured or overinsured, and to protect themselves against any risk you may pose.
The underwriting process can take anywhere from a few days, to a few months. That is why it is important to remember that once you and your advisor meet, you probably won't have insurance by the weekend. This is a lifetime decision, and with that, it takes some time.
Once underwriting is complete, your application will either be approved, rated, or declined.
Approved: The insurance company has confirmed that you are insurable and they will approve your application.
Rated: The insurance company has found some kinks, but they're willing to work it out. This might mean your monthly cost will go up, or they will have included exclusions (ex: they won't pay your death benefit if you die from high-risk mountain biking).
Declined: The insurance company doesn't feel comfortable taking on the risk. Other alternate solutions are available to you, being declined is not the end of the world.
7. 10-Day free look period
Once the policy has been delivered by your advisor, you have a 10-day free look period. This means that during this 10 days you have the right to decide if this policy is really right for you.
You can return the policy and receive your money back, or you can choose to keep your policy.
8. The door is always open
The relationship between you and your advisor shouldn't end right after your policy is approved.
As your life changes, your life insurance will too.
Once a year, or every two years your advisor will reach out to you to see if there is anything monumental that has happened in your life that would warrant additional coverage (purchase of a home, birth of a baby, new job, new loan).
Life insurance doesn't have to be overwhelming, in fact it's quite simple. Start planning when your money matters to someone else.