Life Insurance Basics 101 in 2019
Initial Meeting – This can be accomplished over the phone, online video conference, or office consultation. The first meeting should be to identify the insurable interest for life insurance such as spouse, children, business partners, etc. and to establish the correct amount of life insurance needed. There are multiple ways to determine the correct amount of life insurance but most of the ‘life insurance needs calculators will end up being close to 10 times the annual income for people between the ages of 30 to 55 years old.
Application Process – A lot of life insurance companies are now forcing agents to submit the applications through an online portal. There are a variety of reasons for this such as privacy of information and speeding up the underwriting process. The online life insurance submission process typically requires the proposed insured to complete a phone interview. During this, the person calling will ask detailed medical history questions and gather information on recreational activities. This call generally takes 20 minutes.
Paramedical Exam – Roughly 80% of the time people will need to complete a paramedical exam when applying for life insurance for face amounts of $1,000,000 and below. Some life insurance companies have gone to accelerated underwriting programs so there is a small chance of the proposed insured not needing to give blood and urine. It is only if everything is really clean that the person can qualify without a paramedical exam. Generally, factors considered in order for the proposed insured to avoid having to do the paramedical exam include no adverse medical history on the Medical Information Bureau, good driving history, good credit, and very few underlying health conditions.
Policy Design – It is important to understand there is no cost to apply for life insurance and there is no obligation. If the insurance company comes back to the agent with an “offer” for the proposed insured, then the life insurance agent will be able to run specific proposals with the hard numbers for the client. Again, there is no fee or obligation to get qualified with a life insurance company. Once the proposed insured has a rating on the table from the insurance company, the life insurance agent can design illustrations with the exact numbers. The proposed insured can either take it, or leave it at that point.
Coverage Put in Force – Once a plan has been agreed upon by the proposed insured and the life insurance agent, the insurance company is notified and a policy is either printed and mailed out or an electronic copy. Once the initial premium is collected, the policy is put in force and the effective date of coverage begins. Generally, premiums are paid electronically from the proposed insured’s checking account.
Policy Review – It is prudent to review life insurance policies at least once every 5 years to make sure the coverage and policy is still relevant and properly meeting the current and ongoing needs.