There are some things you should know before shopping online for life insurance.
By keeping these facts in mind, you are much more likely to have a pleasant experience without surprises when your insurance bills come due!
How Life Insurance is Priced
Life insurance products are priced, just as all insurance products, on perceived risk. With life insurance, there is an even greater amount of risk than with other forms of insurance, because the event that will trigger a payoff is bound to happen sooner or later: the policyholder will die.
With car insurance, a policyholder may never have an accident, but with life insurance, one day the insurance company knows it will be forced to pay out.
This is why term life insurance is so much cheaper than whole life. Whole life policies are designed to collect enough in premiums to balance out the payment the company will eventually have to make. Term life policies, on the other hand, are betting on the risk that you will not die before the term expires; this means the company will not have to pay anything.
The better risk you are, the lower your insurance premiums will be. From an insurance company’s point of view, you are a great term life risk if you are a healthy twenty-year-old who does not smoke and wants a twenty-year term policy. The chances of a person like this dying suddenly are very small, so the company is betting that it will make money in the long run through collection of premiums.
On the other hand, a smoking sixty-year-old man with a history of heart disease probably cannot find a term company to insure him, and if he does, he will be paying enormous amounts in premiums.
When you apply for an online rate quote, the company is making an assumption that the information you provide is accurate and will give you an estimate of your premium based on that data. If you are not completely honest when you fill out your online application, your rate quotes will not be right. It is common for companies to issue a “quote” price then change it if the circumstances under which you applied change.
Requirements for Issuing Policies
Another area that may be tricky when getting an online local insurance policy is the qualification process. Agents can tell you up front if you will be required to take a health examination or submit answers to health questions, but online quote generators often skip this information at the beginning of the process.
As you narrow your choices, you may be asked to answer online health questions, but this does not mean you will not necessarily have to have a physical examination as well.
Life insurance companies require physical examinations to be sure that potential policyholders are not on drugs, are not hiding serious medical conditions, and are not smokers if they have declared themselves non-smokers. Physical examinations also establish weight and may reveal other health issues that should be addressed.
Not all policies require a physical examination, but if one is required, your company must let you know before you begin paying premiums.
Other Online Shopping Considerations
Be careful when shopping for life insurance online, as your personal information may be requested. It is always a good idea to read the privacy policies of the websites you visit to find out how your personal information will be used before you part with addresses, phone numbers, or even social security numbers.
Online shopping can be a great way to find low prices on life insurance. As long as you understand how the process works and that quotes you receive may not be “life insurance policy,” you should have an enjoyable shopping experience!