A decade ago, buying a life insurance policy online may have appeared somewhat unusual, but as time has passed, insurance companies have grown more comfortable offering their policies via online applications, and customers have become more demanding of these services.  As a result, what was once considered “atypical” has not become the norm, which has made purchasing life insurance much easier.

Unfortunately, the ease of getting insured quickly and efficiently through the internet or over the phone has also inadvertently removed much of the time people used to use researching their options leading some to make when applying for coverage.

This is why, in this article, we’re going to discuss the process of buying life insurance online and highlight some of the pros and cons one should be aware of.  But before we get into all of that, let’s first just cover some of the basics before we discuss how buying life insurance online will differ from an “in-person” experience.

What is life insurance, and why is it important?

Simply stated, life insurance is a contract between an individual and an insurance company. In this contract, the individual pays a premium to the insurance company in exchange for a lump-sum payment to their designated beneficiaries upon their death.

This payment from the insurance company to the insured, also known as the death benefit, can help cover expenses such as funeral costs and outstanding debts and provide ongoing support for their family’s living expenses.

Life insurance is important because it provides financial protection for your loved ones in the event of your untimely death. If you are the primary breadwinner in your family, or if you have dependents who rely on your income, life insurance can help ensure that they are taken care of and can maintain their standard of living. It can also help cover the cost of outstanding debts such as mortgages, loans, and credit card balances, which can alleviate the financial burden on your family during a difficult time.

Additionally, life insurance can provide peace of mind, knowing that your loved ones will be financially secure if something were to happen to you. It can also be used as a tool for estate planning and can help ensure that your assets are distributed according to your wishes.

The most common types of life insurance.

The three most common types of life insurance are as follows:

Term Life Insurance:

This type of life insurance provides coverage for a specific period of time, usually ranging from one to thirty years. If the policyholder dies during the term of the policy, the death benefit is paid out to the designated beneficiaries. Term life insurance policies are typically more affordable than other types of life insurance because they do not build cash value and only pay out if the policyholder dies during the specified term.

Whole Life Insurance:

This type of life insurance provides coverage for the entire life of the policyholder as long as premiums are paid. In addition to the death benefit, whole life insurance policies also build cash value over time, which can be borrowed against or used to pay premiums. Whole life insurance policies are generally more expensive than term life insurance policies because they offer both a death benefit and a savings component.

Guaranteed Issue Life Insurance:

This type of life insurance is designed for individuals who may have difficulty obtaining coverage due to pre-existing health conditions or other factors. Guaranteed-issue life insurance policies do not require a medical exam or health questionnaire, making them more accessible to individuals who may be considered high-risk. However, these policies typically have lower coverage amounts and higher premiums than other types of life insurance policies.

Guaranteed issue life insurance policies will also contain a graded death benefit which will place a 2-3 year waiting period before the policy will begin to provide coverage for natural causes of death.

Traditional life insurance vs Accelerated Underwriting.

Now that we have a general understanding of the most common types of life insurance policies available, it’s important to understand that each of these “types” of insurance policies can be offered “traditionally” or “online.”  The difference is how the insurance company will choose to process your application.

Traditional life insurance and accelerated underwriting (or simplified issue life insurance policies) are two different methods of underwriting and obtaining life insurance coverage. Here’s a breakdown of the differences between the two:

Traditional Life Insurance underwriting:

1. Medical Exam: With traditional life insurance, the insurance company requires the applicant to undergo a medical exam as part of the underwriting process. This exam helps determine the applicant’s health status, which can affect their risk profile and the premiums they pay. Medical exams will need to take place in person, which will prevent the policy from being able to be completed 100% online.
2. Lengthy Underwriting Process: The underwriting process for traditional life insurance can take several weeks to complete as the insurance company reviews the applicant’s medical history, lifestyle factors, and other risk factors.
3. Higher Coverage Amounts: Traditional life insurance policies generally offer higher coverage amounts than policies obtained through accelerated underwriting.
4. Lower Premiums for Healthy Applicants: Applicants who are in good health and have no pre-existing conditions or other risk factors can often secure lower premiums with traditional life insurance.

Accelerated Underwriting:

1. No Medical Exam: With accelerated underwriting, the applicant does not need to undergo a medical exam. Instead, the insurance company uses technology and data to quickly assess the applicant’s risk and determine whether or not they are eligible for coverage.
2. Faster Underwriting Process: The underwriting process for accelerated underwriting can be completed in as little as a few days, making it a faster option for obtaining life insurance coverage.
3. The application process can be completed 100% online.
4. Lower Coverage Amounts: Policies obtained through accelerated underwriting typically offer lower coverage amounts than traditional life insurance policies.
5. Higher Premiums for Riskier Applicants: Applicants who have pre-existing conditions or other risk factors may pay higher premiums with accelerated underwriting than with traditional life insurance.

Overall, traditional life insurance and accelerated underwriting have their pros and cons, and which method is best for you depends on your individual needs, budget, and health status.  That said, however, only accelerated or simplified issue life insurance policies that will not require a medical exam to be taken can be 100% completed online.

Potential advantages of buying a life insurance policy 100% online.

Simplified issue or accelerated underwritten life insurance policies offer several benefits over traditional life insurance policies that require a medical exam. Here are some of the benefits:

1. Faster Approval: The biggest benefit of simplified issue or accelerated underwritten life insurance policies is that they are much faster to obtain than traditional life insurance policies. With no medical exam required, the underwriting process can be completed within a few days or even hours in some cases.
2. Convenience: Because simplified issue or accelerated underwritten life insurance policies don’t require a medical exam, applicants can apply for coverage from the comfort of their own home or office. This can be a significant advantage for busy individuals who don’t have the time to schedule and attend a medical exam.
3. Easier Application Process: With simplified issue or accelerated underwritten life insurance policies, the application process is much simpler and streamlined compared to traditional life insurance policies. Applicants are typically required to answer a few basic health questions, provide personal information, and provide consent for the insurer to obtain medical records.
4. Flexibility: Simplified issue or accelerated underwritten life insurance policies offer a range of policy options, including term life, whole life, and universal life. This flexibility allows applicants to choose the type of policy that best meets their needs and budget.

In summary, simplified issue or accelerated underwritten life insurance policies offer faster, more convenient, and more flexible coverage options for individuals who may not qualify for traditional life insurance policies that require a medical exam.

Potential disadvantages of buying life insurance 100% online (aka. Simplified issue life insurance).

While there are many benefits to simplified issue or accelerated underwritten life insurance policies, there are also some potential disadvantages to consider. Here are some of the potential disadvantages:

1. Higher Premiums: Simplified issue or accelerated underwritten life insurance policies may have higher premiums compared to traditional life insurance policies. This is because the insurance company is taking on more risk by offering coverage without a medical exam, so they may charge higher premiums to offset that risk.
2. Lower Coverage Limits: Simplified issue or accelerated underwritten life insurance policies may have lower coverage limits than traditional policies. This means that applicants may not be able to obtain as much coverage as they need, which could be a disadvantage for those who have significant financial obligations or dependents to care for.
3. Limited Coverage Options: While simplified issue or accelerated underwritten life insurance policies offer flexibility in terms of policy options, they may not offer the same range of coverage options as traditional life insurance policies. For example, some insurance companies may not offer permanent life insurance policies through these programs.
4. Exclusions and Limitations: Simplified issue or accelerated underwritten life insurance policies may have exclusions or limitations that traditional policies do not have. For example, some policies may have a waiting period before the policy pays out (as with guaranteed issue life insurance policies), or they may exclude certain types of medical conditions from coverage.
5. Risk of Inaccurate or Incomplete Information: Simplified issue or accelerated underwritten life insurance policies rely on the accuracy and completeness of the information provided by the applicant. If the applicant provides incomplete or inaccurate information, the policy may not provide the coverage they need or expect.

In summary, while simplified issue or accelerated underwritten life insurance policies offer many benefits, it’s important to consider the potential disadvantages and weigh them against your individual needs and circumstances before making a decision.

Steps to Buying Life Insurance Online To buy life insurance online.

If you decide to buy a life insurance policy online, follow these steps to ensure you’re getting the best deal.

1. Determine your coverage needs: Before you begin shopping for life insurance online, it’s important to determine how much coverage you need. Consider your financial obligations and how much coverage you would want to provide for your loved ones in the event of your passing.
2. Research and compare policies: Use online tools and resources to research and compare different life insurance policies. Look for policies that meet your coverage needs and fit within your budget.
3. Get quotes: Once you have identified some potential policies, get quotes from the insurance companies offering those policies. Many insurance companies allow you to get quotes online by providing some basic information about yourself and your coverage needs.
4. Complete the application: Once you have selected a policy and received a quote, you can begin the application process. Many insurance companies allow you to complete the application online, which typically involves answering some basic questions about your health, lifestyle, and medical history.
5. Underwriting process: Depending on the type of policy you are applying for, the insurance company may perform an underwriting process to evaluate your application and determine your risk level. Some policies, such as simplified issue or accelerated underwritten policies, may have a shorter underwriting process or no medical exam requirement.
6. Review and sign the policy: Once your application is approved and you have been offered a policy, review the terms and conditions carefully. Make sure you understand the coverage, premiums, and any exclusions or limitations that may apply. If you are satisfied with the policy, sign the paperwork and submit any required payments.
7. Keep your policy up-to-date: Review your life insurance policy regularly to ensure it still meets your coverage needs. If your circumstances change, such as getting married or having children, you may need to adjust your coverage to ensure your loved ones are adequately protected.

The last thing that we’ll leave you with here in our guide to buying life insurance online is that just because you’re looking to purchase a life insurance policy online doesn’t mean that you can’t recruit help along the way.

We here at IBUSA work with dozens of different life insurance companies offering a wide range of products including traditional and simplified issue options. So all you need to do is let us know what you’re interested in, and we’ll do our very best to make sure you find what you’re looking for!