If you’re a physical therapist or occupational therapist looking to ensure the financial stability of your loved ones, then purchasing a term life insurance policy can be a great decision.
While purchasing a term life insurance policy is likely what the large majority of occupational therapists and physical therapists should do, it is not for everyone. That’s why I recommend you read the following before spending money on a new term life insurance policy:
Once you’re ready to purchase a term life insurance policy, you will want to know what to do.
That’s why I will now share with you the steps I took when I purchased my policy.
Let’s get started.
Step 1: Find A Life Insurance Broker
Working with the right type of insurance broker is key to ensuring you purchase a policy that is in your best interest.
Here are qualities you should look for when choosing your insurance broker:
1. Work With An Independent Broker
Make sure that you work with an independent life insurance broker rather than a broker who is tied to a single life insurance company.
The latter will likely only present you with life insurance policy options from one life insurance company.
In contrast, the independent broker should be able to provide you with quotes from many different life insurance companies so that you can better weigh your options.
2. Does Not Push You Towards Permanent Life Insurance
In a few, less common circumstances, permanent life insurance may be an appropriate option to consider purchasing. However, term life insurance will be the best option for the vast majority of physical therapists and occupational therapists.
If you intend to purchase a term life insurance policy and your insurance broker knows this but still attempts to steer you towards a permanent life insurance policy instead, that is a red flag.
Insurance brokers stand to make a much greater commission should you purchase a permanent life insurance policy rather than a term life insurance policy.
You can read about the different types of permanent life insurance policies below so you can better recognize one should your insurance broker try to get you to purchase one:
Make sure your insurance broker has your best interest at heart.
3. Can Be Located Near or Far
The independent broker does not need to be located geographically near you.
All interactions with your insurance broker should be conducted via email and/or by phone.
4. Free To Work With
The Broker you choose to work with should not charge you anything.
That’s because they make their money from the insurance company you purchase your life insurance policy from.
Bonus: Can Simultaneously Help You Purchase Long-Term Disability Insurance
While life insurance provides money to those who depend on your income should you pass away, long-term disability insurance provides you with income should you experience some level of disability that affects your ability to work and generate income.
If you haven’t read about the importance of long-term disability insurance yet, you should do so here:
Some independent insurance brokers can help you purchase both your life insurance policy and your long-term disability insurance policy at the same time. This is what I did and it was very convenient.
Just be sure to work with an insurance broker who is very familiar with the professions of occupational therapy and physical therapy to better ensure you purchase the correct type of long-term disability insurance.
Step 2: Determine How Much Coverage You Want
This may be the most overwhelming step, but try not to lose focus on your reasons for purchasing life insurance in the first place.
There are several different ways to go about figuring out how much coverage to purchase.
Some ways offer quick, generalized number crunching.
Others can involve accounting for every single financial detail to ensure utmost accuracy.
I prefer a more middle-of-the-road option by accounting for larger expenses that are important to your financial goals without getting lost in too many nitty-gritty details.
Here is the general premise:
1. Current Cost Of Living
Start by assessing if your dependents would want to have their current qualify of life maintained or if they would be comfortable living on less then they currently have. For most, the former is the more common answer.
In fact, ensuring even greater financial stability by paying off all of your debts is a common life insurance coverage goal. That’s why a good next step is to add up your debts. These can include but are not limited to your primary residence, cars, credit cards, student loans, and rental properties.
Next, account for recurring expenses that you may not be in debt for but still cost a great deal and are important to maintain.
For example, you may have a child currently attending a private elementary, middle, or high school. Unless your child will transfer to a public school, this cost will be important for you to add in.
2. Future Cost Of Living
You will now want to estimate what expenses your dependents will need covered a few years from now.
For example, do you have a child who will need to have their higher education expenses paid for?
If you already have investments like a 529 account geared towards helping with this cost, don’t forget to take that into account.
Finally, make sure that your dependents have enough to live on. While you may anticipate your children being able to provide for themselves, you may still want to have a large enough nest egg for your spouse to live on for many years to come.
3. The Ladder Strategy
Now that you are more aware of how your expenses vary over time, it may make sense to purchase coverage that similarly changes with your expenses.
A commonly used strategy called “laddering” can suit you well. It involves purchasing multiple term life insurance policies that provide a decreasing total amount of coverage over varying lengths of time. Here’s an example:
- Policy #1: $1,000,000 in coverage lasting 30 years
- Policy #2: $1,000,000 in coverage lasting 20 years
- Policy #3: $1,000,000 in coverage lasting 10 years
You will notice that, while each policy in the example above provides $1,000,000 in coverage, the total amount of coverage being provided during the first ten years is $3,000,000. However, there is only $2,000,000 in total coverage during the next ten years and then only $1,000,000 in total coverage during the last 10 years.
Why might this be a better strategy than purchasing a single policy with $3,000,000 in coverage lasting 30 years?
For one, it will cost more to have $3,000,000 in coverage for the entire 30 years rather than having $3,000,000 in total coverage for only 10 years.
At the same time, you may not need as much coverage during the first 10 years as you might during the second or third sets of 10 years. That’s because your net worth will hopefully continue to increase over time so that your dependents can become more reliant on your own wealth for financial stability and less reliant on a life insurance policy.
Whichever way you decide to go about determining how much term life insurance coverage to purchase, keep in mind that you will pay significantly more to maintain the same amount of coverage for multiple decades rather than laddering multiple policies of descending total coverage.
At the same time, the cost of term life insurance is pretty cheap when deciding between adding or not adding an additional $100,000 to your coverage. So if you will sleep better at night knowing that you added that much more onto your policy, then get it. It’s better to slightly overestimate the amount of coverage you need and give yourself, and your loved ones, peace of mind that your financial state will be secure should something happen to you.
Step 3: Request Quotes And Choose A Policy To Purchase
Now that you know how much coverage you want to purchase, you will next want to ask your insurance broker for quotes from different the life insurance companies.
During this process, your insurance broker will probably ask you a few questions to gather required information for the insurance companies. These questions can include the following:
- Have you been convicted of any felonies or misdemeanors?
- Do you plan to travel outside of the United States anytime soon?
- Do you participate in any risky hobbies such as hang-gliding or rodeos?
- Are you a pilot or a crew member?
- Who would you like listed as your beneficiary
FINANCIAL PEARL: If you have a trust that you would like to list as a beneficiary, be ready to provide the date that the trust was formed.
Your independent insurance broker should then be able to provide you with the life insurance quotes. This information should be organized for you in an easy-to-read format so that you can clearly determine which life insurance policies are more or less expensive to purchase.
Once you decide which policy you would like to purchase, the life insurance company you plan to purchase a policy from may require you undergo a medical exam. Your insurance broker will then help you get scheduled for this next.
Step 4: Undergo A Medical Exam
The medical exam will likely be conducted by a third-party company rather than by the life insurance company directly. That company’s representative, either a nurse or a phlebotomist, will contact you to schedule a day and time when they can come to your home and conduct the exam.
You’re probably wondering what the exam will consist of, so here is what you can expect them to do:
- Ask you your height
- Have you stand on a scale to get your weight
- Collect a urine sample
- Take blood
- Ask the name of your primary care physician and their contact information
- Ask the names of the healthcare facilities that have your medical records and obtain releases
- Ask you if have any diseases
- Ask if your parents are still living and what their birthdays are
- Ask if you have a sibling and what their birthday is
FINANCIAL PEARL: Okay, so this is not really related to finances, but I highly recommend that you drink plenty of water shortly before the medical exam visit so you will be adequately prepared to produce enough urine for the urine sample.
My entire medical exam visit took no more than 30 minutes.
Step 5: Obtain The Results Of Your Medical Exam
My medical exam results were provided to me via email just 3 days after my medical exam was performed.
Step 6: Receive Approval To Purchase The Life Insurance Policy
After obtaining your medical exam results, your insurance broker will inform you if the life insurance company has decided to approve or deny you the opportunity to purchase the life insurance policy from them.
If you would still like to move forward with purchasing the policy, you will then need to sign the policy forms.
Step 7: Receive Notification That Your Policy Is Active
Your insurance broker should then notify you when your policy has become active.
My insurance broker informed me that I would be receiving a copy of my life insurance policy in the mail. I was able to request an electronic copy as well.
FINAL THOUGHTS. . .
I hope this gave you some insight on how to approach purchasing term life insurance.
Do you have any questions that I did not address? Or have you already purchased your own term life insurance policy and have more information to add? Let me know in the comments section below!