5 Steps to Take When Buying Life Insurance

July 25, 2026

Buying life insurance is one of the most important financial decisions you can make for your family. This guide walks you through the five essential steps to finding the right coverage — clearly, without the pressure or jargon.

Step 1: Understand the Two Main Types of Life Insurance

The first decision is choosing between term life insurance and permanent life insurance. Both pay a death benefit to your beneficiaries, but they work very differently.

Term Life Insurance:

• Covers you for a set period — typically 10, 20, or 30 years
• Lower premiums, straightforward coverage
• Best for income replacement, mortgage protection, or family protection during working years

Permanent Life Insurance (Whole, Universal, or Variable):

• Covers you for your entire lifetime as long as premiums are paid
• Builds cash value you may be able to access during your lifetime
• Often used for estate planning, business continuity, or long-term wealth transfer

Quick Comparison:

Not sure which is right for you? An Essential Life advisor can walk you through both options based on your specific situation — no pressure, no sales pitch.

Pro Tip: Many employers provide basic group life insurance, but coverage is usually limited to 1–2x your salary — often insufficient for a family's real needs. A personal policy fills that gap and goes with you if you change jobs.

Step 2: Determine How Much Coverage You Actually Need

Coverage amount is the most critical — and most underestimated — part of the buying decision. Buying too little leaves your family exposed. Buying too much wastes premium dollars.

Use the DIME Method as a starting framework:

• D — Debt: Total outstanding debts, excluding mortgage
• I — Income: Annual income × the number of years your family would need support
• M — Mortgage: Remaining mortgage balance
• E — Education: Estimated cost of college for each child

Add these together for a baseline coverage target. Then consider:

• Final expenses and funeral costs (typically $10,000–$25,000)
• Care costs for aging parents or special-needs dependents
• Business obligations, if applicable

Pro Tip: A general rule of thumb is 10–12x your annual income. But your actual number depends on your debts, dependents, and financial goals. An advisor can help you run the numbers precisely.

Step 3: Choose Your Beneficiary (or Beneficiaries)

Your beneficiary is the person or entity that receives the death benefit when you die. Choosing correctly — and keeping it current — is one of the most overlooked steps in life insurance.

Key considerations:

• You can name one primary beneficiary or multiple (with specified percentages)
• You can name a trust as beneficiary for estate planning purposes
• Always name a contingent (backup) beneficiary in case your primary beneficiary predeceases you
• Minors cannot directly receive life insurance proceeds — a trust or custodian must be named

Important legal and tax factors include creditor protection laws in your state, potential estate tax implications for large policies, and whether the death benefit may affect means-tested benefits for a dependent with disabilities.

Pro Tip: Life changes — marriage, divorce, birth of a child, death of a named beneficiary. Review your beneficiary designations at every major life event. A beneficiary designation overrides your will.

Step 4: Consider Optional Riders to Strengthen Your Coverage

Riders are add-on provisions that customize your policy. They expand protection but typically increase your premium. Select only the riders that address a genuine risk in your life.

Common riders to consider:

• Waiver of Premium Rider — waives premiums if you become totally disabled
• Accelerated Death Benefit Rider — allows early access to a portion of the death benefit if diagnosed with a terminal illness
• Long-Term Care Rider — pays for qualifying long-term care expenses during your lifetime
• Child Term Rider — adds coverage for your children under one policy
• Guaranteed Insurability Rider — lets you purchase additional coverage in the future without new medical underwriting

Pro Tip: Not every rider is worth the cost for every person. Consider your health history, family situation, and financial reserves before adding riders. Discuss each option with your advisor.

Step 5: Apply, Get Underwritten, and Put the Policy in Force

Once you've chosen your policy type, coverage amount, beneficiaries, and riders, the final step is completing the application and going through underwriting.

What to expect:

• Application — personal information, medical history, financial background
• Medical exam — often required for higher coverage amounts; some policies offer no-exam options
• Underwriting — the insurer assesses your risk and assigns a rate class (Preferred, Standard, Substandard, etc.)
• Policy delivery and review — read your policy carefully; most states require a free-look period (typically 10–30 days) to cancel for a full refund

Once the policy is delivered and your first premium is paid, your coverage is active. Keep your policy documents in a secure location and inform your beneficiaries that the policy exists.

Pro Tip: Don't delay because of uncertainty. Premiums increase with age and changes in health. The best time to buy life insurance is before you need it.

Next Step: Talk to an Essential Life Advisor

Buying life insurance doesn't have to be complicated. At Essential Life, our advisors bring deep industry experience to every conversation — helping you cut through the noise and make a confident, informed decision.

There's no algorithm making recommendations here. Just knowledgeable advisors who take the time to understand your situation.