Life insurance has probably seen the most disruption, owing to its reliance on in-person medical exams. According to Jaimie Pickles, insurance GM at shopping analysis company Jornaya, life insurers have risen to the occasion with an improved online purchasing process.

“The digital experience with life insurance is really good,” Pickles says. In comparison to car insurance, “[t]he process is simpler, and price transparency is better.”

Having said that, the online buying process for life insurance isn't perfect or appropriate for every buyer. Here's what to expect when buying life insurance online, as well as some shopping tips.

What to expect when buying life insurance online

Purchasing insurance online is evolving, even as vaccinations promise to lessen the impact of the pandemic. Here's a rundown of what you can expect now, whether you shop directly with insurance companies or use an independent broker who represents multiple insurers.

Comparative price quotes upfront

Purchasing insurance online typically begins with filling out information about yourself and the coverage you require. When shopping for auto or home insurance online, however, you will typically be served names, or only a single name, as recommended choices. To see premiums requires clicking through to the insurers’ websites.

Pickles claims that “life insurance companies are more willing than home and auto companies to provide their rates online in a price comparison landscape.” This makes “shopping for life insurance and getting a good lineup of potential prices much easier.”

An invitation to share your medical records

In addition to requesting basic identifying information from you, an insurance broker may request access to your medical records and, with your permission, release them to one or more insurers. Such data releases from the Medical Information Bureau (MIB) are becoming more common, owing to the fact that they can reduce or even eliminate the need for medical exams.

Before submitting any data to insurers, your agent or broker may use the data for pre-qualification purposes. For example, Assaf Henkin, President & COO of online broker Sproutt, says their approach entails "checking the individual's records to ensure that they qualify both health-wise and financially." If they do, he works with "specific partners who went through a due-diligence process with us to verify that they trust us when we bring them specific customers," he says.

In other cases, your pre-qualifier will submit information to one or more insurers in order to obtain approval for 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.

A medical examination may be required.

The prequalification process for life insurance does not always rule out the need for a medical exam, especially if the best rates are sought. Following a period in which almost no such exams were given, in-person evaluations are now being given again, albeit 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.

Awaiting approval

One of the reasons that life insurance may be less instantaneous than other types of insurance is the time required to conduct and evaluate a medical exam. While starting the process online may make it easier, it may still take several weeks to complete.

There are signs of progress in this area as well. Pickles says that “finalizing coverage with the carrier has never been great in terms of timing.” “But I believe they are doing a better job of underwriting and providing coverage,” with quicker results.

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

What is the best way to buy life insurance online?

Here are some step-by-step instructions for using the Internet to purchase a life insurance policy.

Determine your life insurance needs in advance

Before you go online, you should have a good idea of how much life insurance you need, as well as what type and how long you need it for.

“[Potential policyholders] should be very clear about what they want,” says Elaine Tumicki, Corporate Vice President of LIMRA. “If they've done their homework and know they want to buy a $500,000 term policy, then a completely online process could work for them.”

Friedlander agrees. “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 consulting one, you can, of course, seek assistance online. According to a 2020 LIMRA survey, the majority of life insurance customers conduct internet research before purchasing, with roughly one-third of poll respondents going online to a company website when researching an insurance brand.

You can also estimate your life insurance needs using online calculators available from insurance companies and personal finance websites. Be aware, however, that many such tools require you to enter your email address or other contact information, which may result in annoying follow-up communications, especially if you are only shopping casually. (At any time, you can unsubscribe from the emails.)

Use an independent broker if possible.

If you want to buy life insurance online, you have two options: go to an independent insurance agent or online broker, or buy a policy directly from an insurance company, either through its own website or the website of one of its affiliated agents in your area. The option you select may be determined by how wide you want to cast your net.

Directly purchasing a policy from an insurance company can save you time if you've already done the legwork of comparing quotes and deciding on a specific product — perhaps because you already have other insurance with the company. Discounts for combining life insurance with other coverage are less common than discounts for combining car and home insurance, for example. 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 aren't sure where to begin, a broker can provide you with a broader list of policies to choose from as well as get you prequalified for coverage. Independent agents and brokers are permitted to sell a wide range of insurance products from various companies, whereas specific insurers are only permitted to sell a limited number of products.

Fill out the forms completely.

When providing personal information, do not withhold any facts and ensure that all information is correct. Failure to do so may result in an application being rejected or compromise a future payout.

When it comes to signatures, many insurers no longer require "pen and paper" or wet signatures. E-sign, an electronic signature service, enables you to digitally sign documents without the need for physical paper copies. E-signatures, on the other hand, are backed by The E-Sign Act, making them just as legitimate and legally admissible.

Buy life insurance online or offline?

The pandemic may have accelerated online life insurance purchases, but experts believe the trend will continue. According to Friedlander, “the industry is well-positioned to support [life insurance] consumers who want to complete the entire process online.”

However, purchasing life insurance online isn't for everyone, partly because some people are uncomfortable without human assistance across the desk to help them with what can be a complex purchase.

“One of the reasons life insurance has traditionally been sold by an agent or advisor is that people aren't sure what kind of insurance they need or how to buy it,” Tumicki says. “They need to speak with someone who can guide them through the process, explain the various products, and assess their specific needs. Some of it is possible to do online. Others would prefer to speak with someone they know and trust,” she added.