Think of this article as one of those vitamin-enriched, whole-wheat loaves of bread: an honest, wholesome guide to getting insurance.
This isn’t another one of those ‘clickbait-y’ articles with a promising title and disappointing content. We chose the title because it’s genuinely easier to explain the linear process of getting life insurance in steps.
Think of this article as one of those vitamin-enriched, whole-wheat loaves of bread: an honest, wholesome guide to getting insurance that’s packed full of extra information on how to avoid some of the mistakes people commonly make. And it’s just as ‘nutritionally fulfilling’ to those of you who are already insured, because you’ll probably learn some things about your current policy that you need to change; like you’re paying too much, or you’re not covered in the ways you thought you were. Unless you married your insurer, you can make changes to set that right.
But….before we launch into how to go about getting life insurance, we suggest you find out why insurance is important and which types are right for you. Insurance is there to protect future you against bad stuff that could happen. Even if you’re young and healthy, if you’ve got a pulse and you’re earning an income, life insurance is something you should probably look into. To understand why insurance is important, you need to understand your risks (the bad stuff that could happen) as well as the types of insurance available to cover those risks.
Now that that’s out of the way, let’s get into the 5 steps to getting insured.
Like any big purchase you make, it’s a good idea to shop around before you buy. There are a lot of insurance companies out there and they all offer slightly different products at different prices.
Start by doing your own research by approaching a bunch of insurers to have your needs assessed. Most insurers can provide you with a quote either on their website, over the phone, or face-to-face with one of their brokers (someone trained to give financial advice). You might also want to meet with an independent broker who sells products on behalf of a lot of different insurance companies.
The important thing is not to take any of these quotes or advice at face value, which is where the next step comes in.
Once you’ve gathered quotes, it’s time to compare “apples with apples”. This is where a lot of people feel pretty clueless because the way insurers present this information differs and there may be some words you don’t understand. Basically you want to compare the premiums and how they will change over time, the cover amount, how you’ll be covered when a claim is paid, how a claim is paid out (i.e. in a lump sum or as an income), and whether or not there are any exclusions (things the insurer won’t cover) or waiting periods (a time in which you won’t be covered). Beware of insurers whose quotes exclude underwriting, because the premium they’ve quoted may increase significantly once underwriting has happened. More on this in the next step.
Remember, you don’t have to commit to anyone (not a broker nor an insurer) until you feel you’ve found the right fit, so don’t let anyone pressurise you into making an on-the-spot decision. Once you’re done comparing quotes and have chosen the insurer you want to go with, it’s time to commit.
Underwriting is a way for insurers to work out your level of risk. It relates to your health and sometimes your financial situation, and is handled in different ways by different insurance companies. Usually underwriting involves some questions about your health, income and medical history. It may also involve some medical testing to confirm your current health status. Be careful to answer these questions truthfully because, if you claim for a pre-existing condition or something else that you declared falsely, you won’t get paid out.
If your selected insurer quoted you before underwriting and they find something they’re uncomfortable with during underwriting, they’ll send you a new quote with a higher monthly premium, or alternatively will exclude certain claim conditions, and you’ll have to go back to comparing apples with actual apples all over again.
Beware of insurers who do no underwriting or whose underwriting is almost non-existent as they will often apply a waiting period to your policy, which means you won’t be able to claim during that time. They do this because it makes it easier for them to get new clients, but then it’s their existing clients who run a risk of not being covered should something happen during that period. If there is a waiting period, it’ll appear in the quote and your policy document.
As part of the signing up process, you’ll probably be asked to choose who gets paid out in the event of a claim. This person is called a beneficiary, because they’ll benefit from your insurance cover. It’s common to choose one or more family members to be beneficiaries, and if you choose multiple beneficiaries, you’ll need to say what percentage of the pay out each person will get. Be sure to update this if things change in your life, like when you get married or have your first child. Also, remember to let your beneficiaries know that you have policies because most insurers won’t contact them in the event of your death. You’d be shocked to learn how many people die without any of their loved ones even knowing that they had life insurance.
When all the paperwork is done, you should get a contract, also called a policy document, that has all the important information you need to know about your policy. It’ll tell you about the products (called benefits) you have, when and how claims are paid, and all the rules or conditions. It’ll also show a copy of the information you provided when signing up, and you should carefully check this and let the insurer know if anything was captured incorrectly. Keep your policy document in a safe place where you’ll be able to refer to it in future.
Now you’re basically covered. Well…pretty much. It’s important to check this because, with most insurers, you’re not actually covered until you’ve paid your first premium. The insurance company will set up a debit order on your bank account so that the money automatically comes off on the same date every month, and you ought to get to choose a date that works for you, like after your salary is paid into your account.
If you carry on paying your monthly premiums, you can pretty much assume that everything is as it should be, but if you stop paying them, your cover also stops. A lot of insurers will let you skip just one premium, and they’ll make sure you pay it back the very next month along with your next premium payment (aka you’ll be paying double that month), but if you skip more than one, there are very few insurers who’ll put up with that and your policy will lapse. This actually happens to a lot of people without them realising, and it means they could be walking around thinking they’re covered, when actually they’re not. And that’s not the kind of surprise you need when you come to claim.
And that’s how you get insured. Other than adjusting your policy as your needs or beneficiaries change, there’s really not much more to it. Check out our lesson on the ins and outs of claiming (that thing that you or your beneficiaries do when something bad happens).