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Getting Started
After you have thought about your financial needs and have become familiar with the basic types of Life Insurance, you will need to choose a company and agent.

Choosing a company
About 1,800 companies in the United States sell Life Insurance. While some consumers prefer to buy policies directly from a company, most people buy life insurance through agents or brokers. Much of the information provided here will be helpful whichever way you decide to buy life insurance.

Before purchasing a policy, check the company's financial condition. You can do this by asking the agent or requesting information from your state's insurance department. A number of insurance rating services rate the financial strength of companies. These ratings can be found in large public or business libraries, or can be obtained directly from the rating service. There may be a fee for that information.  Also check with the state insurance department to be sure the company is licensed in your state.

Choosing an Agent
Collect the names of several agents through recommendations from friends, family and other sources. The following are some questions you may want to ask a potential agent:

  1. Is the agent licensed in your state?
    All states require that agents be licensed to sell Life Insurance. In addition, agents who sell variable products must be registered with the National Association of Securities Dealers and have additional state licenses.
  2. What company or companies does the agent represent?
  3. Does the agent have any professional designations?
    Professional designations include Chartered Life Underwriter (CLU) and Life Underwriter Training Council Fellow (LUTCF). Agents who also are financial planners may have designations, such as Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP) or Member of The Registry of Financial Planning Practitioners.
  4. Is he or she a member of a professional association?
    The major association for agents is The National Association of Life Underwriters (NALU). Through NALU's local associations, agents can attend educational seminars and can stay on top of trends in the business. Similar training and services are provided to financial planners through the American Society of CLU and ChFC, the Institute of Certified Financial Planners (ICFP), and the International Association for Financial Planning (IAFP).
  5. What can I expect an agent to do for me?
    An agent should be willing and able to explain various policies and other insurance-related matters. Let your agent know what you expect from him or her. You should feel satisfied that the agent is listening to you and looking for ways to get you the right type and amount of insurance at an affordable price. If you are not comfortable with the agent, or you aren't convinced he or she is providing the service you want, find another agent.

The Agent Visit
Now that you have reviewed the basics of Life Insurance and thought about your personal financial needs, you can shop for a life insurance policy with more confidence and knowledge.

  • What can I expect during an agent visit?
    The agent you have selected will meet with you to discuss your Life Insurance needs. He or she will ask questions about family income and your net worth. Using the information you already have assembled about your financial situation, you should be prepared to discuss your insurance options.
  • Will the agents ask questions about my health?
    In this initial meeting, be prepared to answer questions about your health (for example, age, medical condition, medical history, family history, personal habits). It is important that you answer these questions carefully and truthfully; this information helps a company charge a fair premium for your coverage. For instance, you may pay a lower premium if you don't smoke. On the other hand, if you have a chronic illness, you may be charged a higher premium.
  • Also, in the event of a claim, accurate and truthful answers enable your beneficiary to receive prompt payment. Inaccurate or untruthful answers, however, may cause delay or even denial of a claim.

    When you apply for Life Insurance, you may be asked to have a medical exam. Often, a licensed medical professional will make a personal visit.

Your Agent's Recommendation
Once you have discussed your financial needs and objectives with your agent, he or she will recommend the type of Life Insurance policy that will best suit your purposes. Often, the agent will provide a "policy illustration" that will show how your policy will work.

Carefully study your agent's recommendation and ask for a point-by-point explanation if there are items you don't understand. Because your policy is a legal document, it's important that you know what it provides.

Here is another question you should ask:
          Does this policy truly meet my needs?

If your agent recommends a term policy, consider:

  1. How long can I keep this policy? If you want the option to renew the policy for a specific number of years or until a certain age, ask your agent about the terms of renewal of the contract.
  2. When will be premiums increase? Annually? Or after a longer period of time, such as five or ten years?
  3. Can I convert to a permanent policy? Some policies allow you to convert the policy to permanent insurance without a medical exam, regardless of your physical condition at the time of conversion. These policies are known as "convertible term."

If your agent recommends a permanent policy, consider:

  1. Are the premiums within my budget? Be sure you want to spend the money for this type of long-term coverage.
  2. Can I commit to these premiums over the long term?
  3. Make sure you know the amount you would receive if you surrender your policy.
    Keep in mind that permanent insurance is designed to provide protection for your entire life. If you don't plan to keep the product for many years, consider another type of policy. Cashing in a permanent policy after only a couple of years can be a costly way to get insurance protection for a short term.