How Life Insurance Works: What You Need to Know Before Buying a Policy

Life insurance is one of those things many people know they probably need, but understanding how it actually works is another story. September is Life Insurance Awareness Month, so we’re breaking down some of the questions our Shepherd Insurance advisors hear most often. 

How Does Buying Life Insurance Work? 

Life insurance isn’t something you simply pick off a shelf. You’ll start by completing an application, and the insurance carrier will review information about your health, age, lifestyle, and the amount of coverage you’re requesting. This is called underwriting. 

Depending on your situation and the insurance carrier, you may go through traditional underwriting or qualify for an accelerated process. 

• Traditional underwriting: Application → Health questions → Medical information review → Possible exam → Decision 

• Accelerated underwriting: Application → Health questions → Medical information review → Decision 

The good news? Not everyone needs a medical exam. Your age, health history, coverage amount, and the carrier’s guidelines all play a role. 

What Is a Life Insurance Medical Exam? 

If an exam is required, it’s typically a fairly simple process. 

A paramedical exam may include: 

• Height and weight 

• Blood pressure and pulse 

• Blood or urine samples 

• Basic health questions 

Depending on the provider, you may even be able to complete the exam at home or at your workplace. 

What Is the MIB? 

You may also hear about the MIB, or Medical Information Bureau, during the life insurance application process. Participating insurance companies use MIB information as one way to help verify information provided on an application and identify potential inconsistencies. 

In other words, it’s part of the carrier’s review process, not something you need to be intimidated by. 

How Much Life Insurance Do I Need? 

This is one of the most important questions to ask, and there’s no universal answer. Think about the people and financial responsibilities your income supports. Your coverage may need to account for things like: 

• Your mortgage 

• Everyday living expenses 

• Children or other dependents 

• Future education costs 

• Debts 

• Business obligations 

• Your family’s long-term financial needs 

The goal isn’t simply to buy the biggest policy you can afford. It’s to have enough coverage to help protect the people who depend on you. A Shepherd Insurance advisor can help you walk through those considerations and determine what makes sense for your situation. 

Is Life Insurance Expensive? 

One of the biggest reasons people put off buying life insurance is the assumption that it’s too expensive. But the cost depends on several factors, including your age, health, coverage amount, policy type, and underwriting results. 

For many younger, healthier applicants, term life insurance can provide substantial coverage at an affordable premium. Instead of guessing what life insurance might cost, get a quote based on your actual situation. 

Should I Wait Until My Health Improves? 

This is another question we hear often. It can be tempting to wait until you’ve lost weight, improved your health, or reached another goal before applying. But waiting also means applying at an older age, and age is one of the factors carriers consider when determining premiums. 

Improving your health may affect your underwriting results, but there’s no guarantee waiting will result in a lower premium. If you’re considering life insurance, it’s worth talking with an advisor before deciding to wait. 

What About Life Insurance Through My Employer? 

Employer-provided life insurance can be a great benefit, but it’s important to understand what it actually provides. Your employer’s coverage may not be enough to meet your family’s needs, and depending on the plan, it may not follow you if you change jobs. 

Take a look at: 

• How much coverage you have 

• Who your beneficiaries are 

• Whether your coverage is portable 

• What happens if you leave your employer 

Individual life insurance can provide additional protection that isn’t tied to your current job. 

Your Life Changes. Your Coverage Should, Too. 

One of the biggest things we want people to remember during Life Insurance Awareness Month is that life insurance isn’t a “set it and forget it” decision. Getting married, buying a home, having a child, changing jobs, starting a business, or experiencing a significant change in income can all be good reasons to review your coverage. 

Even if nothing major has changed, a regular review can help make sure your policy still fits your life. 

At Shepherd Insurance, we’re here to make those conversations easier. Our life insurance advisors can help you understand your options, evaluate your needs, and find coverage that makes sense for where you are today. Explore life insurance with Shepherd Insurance.