What Is Needed to Take Out a Life Insurance Policy?

How Much Coverage

• Carefully assess the amount of life insurance your beneficiaries will require prior to purchasing a policy. Aspects to consider are the age, current needs and projected future needs of your dependents. For example, how many years will dependent children be expected to remain at home, how much does it cost annually to provide for them now and how will college be paid for? Other factors to consider are what portion of household income your salary encompasses, how much debt you have and how that debt would be settled without your income.
  
  

Risk Factors

• Insurance companies quantify risk factors that ultimately determine what life insurance coverage will cost an individual. Your lifestyle plays a significant role. For example, tobacco users pay higher premiums than nonusers do. The issuer may consider how much you exercise on a regular basis. Age, weight and existing health problems are substantial factors in determining your insurability. Many insurance providers consider your credit history and current finances in calculating risk. Individuals with a good credit history and sustainable income are considered more stable and reliable and thus less risk
  
  

Company Requirements

• Depending on the type of policy you apply for, the company you choose and your answers to preliminary questions, an insurance provider may require a health examination prior to approving your application. It is vitally important that you answer all questions fully to the best of your knowledge, as misleading or falsified information on an insurance application can lead to nullification of benefits
  
  

Contract Types

• Once you have determined how much insurance you need, you must decide what type of policy would work best for your individual situation. Term life insurance, as the name implies, provides coverage for a specific amount of time. For example, the term may be until your 80th birthday, at which time the coverage elapses. Alternatively, the coverage may be viable for an allotted amount of time with an option to renew. Conversely, a permanent or whole life policy, provided premium payments are up to date, covers the insured until death, regardless of age.