Life Insurance Buying Guide
When shopping for life insurance, there are many important details to consider. In short, you need to address the following points:
- Finding a policy that meets the needs of you, your family, and your budget
- Deciding how much insurance coverage you need
- Making a confident decision as to when you should purchase coverage
Every consumer is in a unique position. For this reason, the way you approach buying life insurance is not going to be exactly the same as the next person.
Here are seven important details to focus on as you get started:
1. Take note of your life insurance needs based on your current circumstances and future plans.
2. Make sure you can comfortably afford the premium payment.
3. Don’t sign anything until you know exactly what you are getting as well as what you are required to pay for coverage.
4. Don’t buy life insurance unless you are 100 percent sure that you plan on paying the premium month after month.
5. Never drop one policy just to buy another. It can be very costly to replace the insurance that you currently have.
6. Carefully review your policy and discuss anything that is not clear with your agent. This is the time to ask any questions that may be weighing on your mind.
7. Every few years, review your life insurance policy with your agent to ensure that you still have enough coverage based on your needs and income.
Three Simple Steps to Buying Life Insurance
Entirely too many consumers complicate the process of buying a life insurance policy. There are three simple steps you can take to ensure yourself of making the proper purchase:
1. Decide how much coverage you need, as well as how long you want it to last. During this time, you should also focus on the many types of coverage – term, whole life, universal – as well as the cost.
2. Request at least three life insurance quotes. This helps you compare one policy to the next, allowing you to see what the industry has to offer somebody in your position.
3. Speak with an agent one-on-one to ensure that you understand the policy being offered. This is also a good time for asking questions. You should never feel forced into making a purchase.
How much Coverage do I need?
This is one question that you are going to be asking yourself, time and time again, until you purchase a policy. As you attempt to answer this question, you can focus on these additional questions:
- How much of my family’s income do I currently provide?
- Do I have children who will need money to finish their education should I pass on prematurely?
- How will my family pay for final expenses when I die?
- Will estate taxes affect the amount of money that my beneficiary receives?
- How much coverage can I comfortably afford to pay for every month?
As you answer these questions, you will get a better understanding of where you stand right now and how much coverage you should purchase moving forward. During this time, you need to take into account other assets that may be left behind including: savings, real estate, investments, and personal property.
Before You Drop Your Policy
Are you tired of paying for your current life insurance policy? If so, you may want to let it drop. That being said, there are several things to consider before doing this:
- If you are interested in replacing your policy, never cancel an old one until the new one is active.
- Consider your age. Now that you are older, you may find that holding onto your old policy may be more cost effective.
- If you are older, your health has changed. In turn, your premium may be higher than what you are currently paying.
- Don’t replace your policy, change it instead. You may be able to change your policy or add coverage as opposed to cancelling it altogether.
Choosing the Right Type of Life Insurance
You should never believe the myth that all life insurance policies are the same. Nothing could be further form the truth. Some offer coverage for a particular period of time, while others cover you until the day you die.
Generally speaking, there are two main categories of life insurance: term insurance and cash value.
1. Term life insurance. This type of life insurance covers you for a specified period of time, ranging from 1 to 30 years in most cases. Once your term expires, you will be without insurance. Additionally, this type of policy does not accumulate cash value.
2. Cash value life insurance. With this policy, the premium is higher at the beginning when compared to term coverage. However, your provider invests the portion of the premium that is not used for the cost of insurance. This helps to build cash value that can be used later on, such as for a policy loan or to increase your income during retirement.
3. Whole life insurance. As long as you continue to pay your premium you will receive coverage. This is the best option if you want to be guaranteed of leaving something behind to your beneficiary. Typically, whole life insurance is much more expensive than term life coverage.
4. Universal life insurance. This is known as “flexible life insurance” thanks to the ability to vary your premium payment. Additionally, the premium that you pay is added to an account that earns interest.
Finding the Best Value
After you make a decision on the type of life insurance to purchase, you need to set your sights on finding the best value.
Comparing rates is a great place to start, but this is far from the only detail to consider. There are other factors that should affect your decision including:
- Will your premium stay the same year after year?
- Are you accumulate cash value month after month?
- When will your coverage expire?
Buying life insurance may not be something you look forward to, but it is important to the overall well being of your finances as well as the future well being of your family.