If you want to buy life insurance, you need to apply and qualify first. Applying for life insurance typically involves filling out paperwork, taking a medical exam, and providing health histories for you and your immediate family. The lower the risk you present to the insurer, the lower you can expect your premiums to be.

Understanding the process of obtaining life insurance can help you get the coverage you need at a price you can afford. Read on to learn about what's involved in buying life insurance from the application process through underwriting and reaching a final decision.

Determining Your Life Insurance Coverage Needs

There are two main categories of life insurance: permanent life insurance, which provides coverage for your entire life, and term life insurance, which only covers a set period of time. A local insurance agent can help you better understand your options.

Once you have decided to purchase life insurance, you'll need to determine your coverage amount. Consider how much your beneficiaries will need after you die, how much you already have available through personal assets or group term insurance (such as a policy offered by your employer), and what level of premiums you can afford.

Medical Questions on the Life Insurance Application

Your first step is applying for life insurance coverage with a broker, agent, or directly with an insurance company. The application will ask for basic information such as your name, address, occupation, and employer. It will also typically ask for the following personal information:

• Height
• Weight
• Date of birth
• Lifestyle habits (i.e., smoking, drinking, exercise)
• Health histories of immediate family members
• Current medications
• Financial information, including your annual income and net worth
• Risky hobbies, such as rock climbing or skydiving
• Criminal convictions, particularly moving violations while operating a vehicle

While it may be tempting to lie about your weight or other health issues, it's important to tell the truth. If the company discovers you lied about a health condition or lifestyle, it may deny your application. If the falsehood is uncovered after the policy is issued, the company can increase your insurance premium, cancel your policy, or deny a beneficiary's claim to the death benefit.

Some insurance companies only require you to answer health-related questions (such as which medications you take or surgeries you've had) on the application. These no-exam life insurance policies—such as guaranteed issue life insurance and simplified issue life insurance—are usually more expensive and offer lower face values than policies that require a medical exam.

The Life Insurance Medical Exam

Most companies and policies require an in-person medical exam. A life insurance agent will arrange for a paramedical (a licensed healthcare professional contracted by the insurance company) to meet you at your home, office, or a clinic selected by the insurance company. During the exam, the paramedical will likely:

• Record your medical history (including medical conditions, surgeries, and any prescription medications)
• Ask about your immediate family's medical history
• Take your blood pressure
• Listen to your heartbeat
• Check your height and weight
• Draw a blood sample
• Get a urine sample
• Ask about lifestyle habits that could affect your health (e.g. exercise, smoking, drinking, recreational drug use, frequent travel, high-risk hobbies)

There may be additional tests you need to undergo depending on your age, the type of policy you want, and the amount of coverage you're applying for. Additional tests could include an EKG, a chest X-ray, or a treadmill test.

Next, an underwriter at the insurance company will review your application and medical exam results. They may order medical records from your physician to learn more about any medical conditions you have and any treatment received. This information helps them determine the level of risk you represent to the company financially and how much to charge you for coverage.

Once your application and medical exam have been reviewed, the company will either approve or deny your request to purchase coverage. That process can take days or weeks, depending on whether you submitted a complete application, how long it takes to receive lab results, whether the company requests information from your physician, and so on.

If Your Coverage Is Denied

If you "fail" the medical exam and the insurance company declines to cover you—or if it offers to cover you at a higher rate due to the results of your exam—you have several options. Ask why you were denied to better understand the available options. You can ask your insurance broker if there is a company that will work with your medical status, or you could apply for a no-exam policy.

If you are offered a policy but aren't happy with the rate, you can purchase it for the time being and then ask to be re-evaluated at a future date (and improve your health or lifestyle risks during that time). Of course, you can enquire with more than one insurance company to seek the best possible life insurance policy for your circumstances. Finally, you can pursue group term life insurance through your employer, which often doesn't require a medical exam.

Ways to Reduce Your Life Insurance Premium

While you can't do anything about some of the main factors affecting your insurance premium (age, gender, and family medical history), there are steps you can take regarding lifestyle characteristics. You could lower your insurance premium if you:

• Quit smoking. As a non-smoker, you are likely to live longer. That gives the life insurance company potentially more years to collect your premium payments and less time until they pay out the policy when you die, so that could lower your rate.
• Lose weight. Weight loss often leads to lower cholesterol levels, lower blood pressure, and a lower risk of developing chronic diseases like diabetes. These improvements to your health make you a better insurance risk.
• Reduce or eliminate your alcohol intake. Drinking can pose a potential health risk. Life insurance companies will check your application, driving record, and medical exam to get a picture of your drinking habits. Drinking less alcohol, or stopping entirely, makes you less of a risk for the company; therefore, you'll likely be rewarded with a lower premium.
• Improve your driving. Insurance companies can hike your premium if you incur multiple moving violations.

Other non-lifestyle-related ways to reduce your premium include:

• Using term instead of permanent life insurance. Depending on your age and how long you expect to need life insurance coverage, you may want to consider using a temporary term policy instead of permanent life insurance. While term policies eventually expire, they cost much less.
• Switching insurers. If you think your current policy is overpriced, you may be able to get similar or better coverage for less money from a different company. Don't cancel your existing policy though until you're sure you've qualified for the new one.
• Eliminating riders. Riders are optional policy provisions that provide extra benefits for you or your beneficiaries. However, these extra benefits increase your insurance premium. Consider whether there are any riders you could do without. Types of riders include:
• Accidental death benefit rider: pays your beneficiaries if your death was the result of an accident
• Spouse and children's term life insurance riders: pays if a spouse or child covered under your life insurance policy dies
• Waiver of premium rider: pays your policy premium if you become permanently and totally disabled
• Guaranteed insurability: provides an option to buy additional coverage in the future without having to submit evidence of insurability (such as a new medical exam)
• Accelerated benefits rider: pays a portion of your death benefit payment in advance or your premium if you are diagnosed with a terminal illness, or if you require long-term care or nursing home services
• Payor rider: waives premiums if you die or become disabled before a covered dependent child reaches a certain age
• Looking for "no-load" or "low-load" policies. These policies are often less expensive because they don't pay insurance agents a sales commission or the commission is low.
• Asking about payment discounts. You should receive a discount for paying your bill in full annually rather than paying monthly or quarterly. You could also receive a "bundle" discount if you buy your life insurance from the same company as your auto and homeowners insurance.
• Reviewing your credit report for accuracy. Insurance companies can review your credit report when determining your premium. Paying your bills on time, which is noted on your report, assures the company you are likely to pay your premium on time and in full. While your credit report does not determine eligibility, underwriters do look here for factors that affect premium rates, such as bankruptcy and DUI convictions.
• Choosing a company that has experience covering people with your condition. If you have a medical condition, a broker can help find a company that is likely to work with you and may provide a better rate.
• Reviewing your Medical Information Bureau file. Insurers share information on applicants' medical conditions through the Medical Information Bureau (MIB). Request a free copy of your file from the MIB website and review it; incorrect information could negatively affect your premium.

The Bottom Line

Understanding the process of obtaining life insurance helps you get the coverage you need at a price you can afford. Knowing the steps you will take and the expected timeline provides peace of mind and fewer surprises. You can also help reduce your premiums by understanding the personal factors insurance companies consider when evaluating applications and setting premiums, and making lifestyle adjustments to minimize those risks.