Buying life insurance is a wise decision for many people, but it can be confusing and intimidating. And the confusion only escalates if you are buying your first policy. What kind of policy should you buy? What should the payout be? Many questions need answering, and you might not get all the answers from your insurance agent. When selecting life insurance policies, the first thing you need to do is make sure that you actually need them; only then can you start searching for the kind of coverage you need.
Determine whether you really need life insurance:
First, you need to determine whether life insurance is right for your situation. Several factors go into this decision, but it all boils down to one simple question: “Are other people in my family financially dependent on me?” If so, it’s likely a good idea to purchase some form of coverage. If you have young children at home or elderly parents who rely on your income to live, buying a life insurance policy should be a priority. Life insurance ensures that those dependent on you have enough time and money to get things in order when an unlikely event occurs.
Calculate how much life insurance coverage you need:
If you need life insurance, the next step is to figure out how much coverage you need. The amount of coverage will depend on your needs and financial situation. If there’s enough money in savings or investments that loved ones can use to cover living expenses without touching the principle, then a policy offering a payout of $50-100K would probably suffice. However, additional protection may be necessary if those funds are already earmarked for other things like college tuition or estate planning. This way, family members aren’t forced into selling assets at a loss to make ends meet until they can find new employment after losing their primary breadwinner.
What type of life insurance should you buy?
There are two main types of life insurance available, and they typically serve very different purposes. Here’s the rundown on each one:
Term Life Insurance:
This is just what it sounds like, temporary coverage that only lasts for a set period (such as 20 years). You can choose coverage periods from as short as one year to 30 years or more, but there will always be an end date when your policy expires. If you’re in good health, term policies tend to have much lower rates than other options because most carriers don’t consider their risk factors ” permanent “. The downside is that they only cover you until the end of your selected term and don’t offer coverage once the policy expires.
Whole Life Insurance:
This type of coverage lasts as long as you live (as opposed to a limited term) and can be considered permanent since it typically doesn’t expire at a set age or after a specific period. Some people choose whole life insurance because it also offers investment opportunities. Over time, additional money may build up within the policy that can provide future benefits such as college tuition assistance, retirement income, etc. The main disadvantage here is that you will pay higher premiums than term life insurance, and the rates never go down since it’s guaranteed to be in effect for as long as you live. However, if you are in good health when you apply, these plans tend to have lower rates than other options like universal or variable life policies.
Find an insurance company you can get behind:
Once you’ve determined how much coverage you need and the plan to suit your needs, the next step is to find a company that offers competitive rates. Different companies offer different rates on similar coverages. The goal here is not to compare the premiums and prices but to see above the numbers. Evaluate what each company is offering at their price point. Does the insurance policy have everything you want? Does it meet your objectives? Look for small benefits and added costs; these will usually point you towards a company that you can trust.
Go over the policy and sign it:
Once you’ve found a company and a plan that works for you, the next step is to review it with someone who can help explain all of the details. Insurance agents are usually pretty helpful when it comes to this point because they want their clients to be educated! If anything about the policy doesn’t make sense, or if you have further questions, start from scratch and ask them again. The last thing you’d ever want for an insurance agent is to rush through the contract without fully answering all your concerns. This will leave you in even more confusion. So make sure you work with an agent you can trust.
Lastly, always read through your policy and know exactly what you’re signing up for. If you spot any discrepancy, take it to your agent and get things straightened before putting pen to paper.