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By Noel Dávila and Paul Reynolds
May 24, 2021
Hand Pulling Life Preserver Out Of Computer Screen
Jose Velez / Money

When you think of cutting-edge industries, insurance probably doesn’t come to mind. But the industry is bucking its stodgy image, and nowhere more so than when it comes to making it simpler to buy life insurance online.

Online sales of life insurance were growing even before COVID-19 — rising from 21 percent in 2016 to 29 percent in 2020, according to insurance research company LIMRA — but the pandemic has further raised its profile. With face-to-face visits to agents curtailed, and more commerce moving online, even for financial products, the insurance business has been forced to adjust.

Life insurance has faced probably the greatest disruption, largely due to its dependence on in-person medical exams. But life insurers have risen to the occasion with an improved online buying process, according to Jaimie Pickles, insurance GM at shopping analysis company Jornaya.

“The digital experience is really good with life insurance,” Pickles says. Compared with car insurance, especially, “[t]he process is simpler, and the transparency for prices is better.”

That said, the online buying process for life insurance still isn’t perfect, or suitable for every buyer. Here’s what to expect when buying life insurance online, and tips on how to optimize your shopping.

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What to expect when buying life insurance online

Buying insurance online continues to evolve, even as vaccinations promise to ease the impact of the pandemic. Here’s a rundown of what the experience typically offers now, whether you shop directly with insurance companies or use an independent broker that represents multiple insurers.

Comparative price quotes upfront

Buying insurance online typically begins with filling out information on who you are and the coverage you are looking for. But when shopping online for auto or home insurance, you’ll typically be served up names, or only a single name, alone for recommended choices. To see premiums requires clicking through to the insurers’ websites.

By contrast, “life insurance carriers are more willing than home and auto companies to provide their rates online in a price comparison landscape,” says Pickles. That makes it “much easier to shop for life insurance and get a good lineup of potential prices.”

An invitation to share your medical records

In addition to having you submit basic identifying information to them, an insurance broker may request permission to access your medical records — and, in turn, release them to one or more insurers, with your approval. Such data releases, from something called the Medical Information Bureau (MIB), are increasingly common, in part because they can reduce or even eliminate the need for medical exams.

Your agent or broker may use the data for its pre-qualification process, ahead of submitting any data to insurers. For example, Assaf Henkin, the President & COO of online broker Sproutt, says their approach involves “checking the individual’s records to make sure that health-wise, and financially, they qualify.” If they do, he says, he works with “specific partners that went through a due-diligence process with us to verify that they trust us when we bring them specific customers.”

In other cases, your pre-qualifier submits data to one or more insurers, to seek approval of a maximum amount of coverage and a premium quote from each. Again, this spares you the trouble of doing that, and allows you the benefit of the expertise of the broker or agent in knowing the companies most likely to green-light you and to offer a competitive premium.

The possible need for a medical exam

The prequalification process for life insurance doesn’t always preclude the eventual need for a medical exam, especially to get the best rates. After a period in which almost no such exams were conducted, in-person assessments have now resumed, with safeguards. For all the convenience of no-exam life insurance, its premiums are often higher than for coverage that involves submitting to a full physical.

A wait for approval

The time required to conduct and evaluate a medical exam is among the reasons that life insurance may be less instantaneous than other insurance types. While the process may be easier when initiated online, the process may still take several weeks to complete.

Here, too, there are signs of improvement. “Finalizing coverage with the carrier has never been great” in terms of timing, says Pickles. “ But I think they’re doing a better job of underwriting in providing coverage,” with faster results.

Also, some insurers may offer a temporary short-term life policy that provides coverage while you wait for your application to be approved, says Mark Friedlander, Director of Corporate Communications for the Insurance Information Institute.

How to buy life insurance online

Here are step-by-step tips on how to use the Internet to get a life insurance policy.

Determine your life insurance needs in advance

The better your sense of how much insurance you need, and of what type and for how long, before going online, the smoother your experience may be.

“[Potential policyholders] should really know what they want,” says Elaine Tumicki, Corporate Vice President at LIMRA. “If they’ve done their research and they know they want to buy a $500,000 term policy, then a fully online process could work for someone like that.”

Friedlander concurs. “Do your research and don’t be afraid to reach out to an insurance professional or a financial advisor before you start the application process.”

In the absence of such professionals, or before you turn to one, you can, of course, get help online. A 2020 LIMRA survey found a majority of life insurance customers conduct internet research before they buy, including about one-third of poll respondents said they go online to a company website when researching an insurance brand.

You can also use online calculators available through insurance companies and personal finance websites to estimate your life insurance needs. Be aware, though, that many such tools require you to enter your email address or other contact information, and so could result in follow-up communications that could become annoying, especially if you are shopping only casually. (You can always unsubscribe from the emails as needed.)

Consider using an independent broker

If you’re set on purchasing life insurance online, you’ll have two main alternatives: going to an independent insurance agent or online broker or buying a policy directly from an insurance company, through either its own website or that of one of its affiliated agents in your area. The option you choose may boil down to how widely you want to cast your net.

Purchasing a policy directly through an insurance company can save you time if you’ve already done the legwork by comparing quotes and have decided on a particular product — perhaps because you already have other insurance with the company. Discounts for bundling your life insurance with other coverage are less common than with, say, combining car and home insurance. But some companies, including American Family, do offer such deals.

But going to only a single company may, of course, mean you pay more than you would by shopping around, and could also risk getting no policy, if the company rejects you for medical reasons, say. If you haven’t compared a quote or quotes, and don’t know where to start, a broker can provide you with a broader list of policies to choose from, as well as allowing you to get prequalified for coverage. Independent agents and brokers are licensed to sell an array of insurance products from different companies, while particular insurers can only focus on their roster of products.

Fill out the forms accurately

When providing personal information, do not withhold any facts and make sure everything is accurate. Failure to do so can result in a rejected application or compromise a future payout.

As for signatures, many insurers no longer require “pen and paper” or wet signatures. E-sign, an electronic signature service, allows you to sign documents digitally without having to resort to physical paper copies. And E-signatures are backed by The E-Sign Act, which makes them just as legitimate and legally admissible.

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Buy life insurance online or offline?

The pandemic may have accelerated online buying for life insurance, but experts see the trend as one that’s here to stay. “The industry is well-positioned to support [life insurance] consumers who want to complete the entire process online,” says Friedlander.

That said, purchasing life insurance online isn’t for everyone, partly because not everyone is comfortable without human help across the desk to assist with what can be a complex purchase.

“One of the reasons life insurance has been traditionally sold by an agent or advisor is that people aren’t sure what kind of insurance they need and how to purchase it,” says Tumicki. “They need to talk to someone who can help them through the process, explain the different products and evaluate their particular needs. Some of that can be done online. For others, it’s better to talk to an individual that they trust,” she added.

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