How to shop for online life insurance

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Buying life insurance online is very similar to buying a traditional policy. Before you get started, you need to figure out how much coverage you need. And once you know the death benefit amount and term length, you should compare quotes from multiple insurers to ensure that you get the best possible price. Finally, you should let your family know about the policy and leave behind written details, so they’re able to file a death benefit claim if you die. Regardless of the type of life insurance you buy, all these steps stand true.

Where online life insurance differs, however, is in the actual application process. Instead of undergoing the phone interview or medical exam, you submit details about your background online. After you complete the application, you may receive an application decision in just minutes — though sometimes it can be longer. For many policies, this allows you to get coverage almost instantly.

While the steps are similar to buying traditional life insurance, chances are, a little guidance can go a long way. Here’s how to shop for online life insurance and set your family’s financial future up for success.

1. Figure out how much life insurance you need

Before you start shopping for coverage, you need to determine how much life insurance you need. If you buy too much, you’re overpaying, but if you don’t buy enough, your family’s financial health will be in jeopardy when you die.

To figure out the exact amount of coverage you need, it’s best to talk to a certified financial planner or financial advisor. But, you can get a general idea by crunching some numbers yourself.

Most people usually need 10 to 15 times their income in life insurance coverage. You can tally up a more precise amount by using the DIME method. When you’re using the DIME method, you tally up your:

Debts: You’ll want your policy to cover any debts they’d have to pay off if you died.
Income: Multiply your income by the number of years you plan to financially support your family. For example, if you have a newborn that you want to provide for until they turn 18, you’ll multiply your income by 18.
Mortgage: Make sure your policy covers the balance left on your mortgage.
Education expenses: If you plan to cover your children’s education expenses, you’ll want to incorporate those expenses into your policy.

You’ll also want to determine how long you need coverage for, as you’ll likely have term length options. Some people only need coverage for 10 years, while others may need it for 30. Your term length should last longer than your longest financial obligation.

2. Gather all your important documents

When you apply for online life insurance, you’ll be asked about your health history, prescriptions, smoking status, lifestyle choices, and more. Having documents such as your medical records handy ensures you can give the most accurate responses on your application. While you likely won’t be penalized for a small mistake, intentionally lying on your application can invalidate the policy down the line.

You will also be asked to provide your Social Security number.

3. Compare quotes from multiple online insurers

Each insurance company has its own underwriting department, which means they underwrite applicants differently than each other. While a medical condition or lifestyle choice may get you high premiums at one company, you may still get the most affordable rates at another.

For this reason, it’s important that you don’t settle for the first quote you get. Instead, shop around and compare quotes from multiple insurers so that you can get the best possible price.

4. Apply and wait for an application decision

Once you submit your application, you’ll likely receive an application decision within the hour — if not immediately. Online life insurance companies provide near instant approval, offering almost immediate coverage.

Unless the insurer needs more information, you won’t have to wait long for the application decision. If you’re approved for coverage, you will also be notified of how much you’ll be charged for premiums.

5. Sign your electronic policy and pay your first premium

If you’re comfortable with the terms offered by the online insurance company — namely, the cost of the policy — you’ll sign the policy and pay the first premium for your coverage to become active.

Because you’re buying an online life insurance policy, all of this will be done completely online. You won’t need to print out any forms or call an agent to pay over the phone.

6. Tell your family about the policy and leave written details

An online life insurance policy will only be able to provide financial support to your family if they file a claim when you die. For this reason, it’s important that you tell your beneficiaries about the policy. Without any knowledge of it, they won’t be able to get the funds that you secured for them.

While you need to tell your family about the policy, you should also leave them written details with the policy information. This includes who the insurer is and what the policy number is, so that they can easily file a claim if you die.

Many people leave this information in their will, but you can also leave a second copy elsewhere. Just make sure your family knows where to find the policy details.

Shopping for online life insurance doesn’t have to be complicated. Our steps above prepare you for what to expect. Armed with this knowledge, you can shop for and find the best policy for you.

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