The process of buying life insurance can be both complicated and overwhelming for beginners. This guide will set you on the right track.
Ask Yourself if You Need Life Insurance
Life insurance primarily helps provide financially for your dependents after your death. Alternatively, the money can be used to benefit a charity or keep a business going. If you don’t have any family, cause, or business to support, there’s a good chance you would be better off investing your money elsewhere.
Determine Which Type of Life Insurance You Need
Term Life Insurance: Affordable coverage for a specific death benefit over a predetermined period – a smart choice for parents with young children.
No-Exam Life Insurance: Applicants do not need to undergo a medical exam. A good option if you have health problems that may disqualify you from obtaining a traditional life insurance policy.
Permanent Life Insurance: Comparatively expensive coverage that never expires. Premiums help maintain the policy’s death benefit and allow you to build cash value over time.
There are two types:
Whole Life Insurance: Consistent premiums; guaranteed accumulation of cash value
Universal Life Insurance: Flexible premiums; builds cash value with investment options
Figure out How Much Insurance You Need
First, consider the following factors:
– Your loved ones’ financial resources after you die (Social Security and other retirement-related survivor benefits, group life insurance, etc.)
– Your loved ones’ financial needs after you die (final expenses, debts, and income needs)
To decide how much life insurance coverage you need, subtract the resources from the financial needs. To determine how long you need coverage for, consider what you need to get out of your policy.
Choose a Life Insurance Company
Not all insurance companies operate in all states and the policies offered may differ geographically. Before you decide on an insurance company, check with the NAIC and the insurance department in your state to see if there are any complaints registered.
Another thing to consider is whether the company operates as a stock company or a mutual insurance company – which gives you the opportunity to earn dividends if the company performs well. Furthermore, steer clear of companies with a bad financial rating.
Find the Right Life Insurance Agent or Broker
If you prefer to work with an agent or broker in person, look for someone trustworthy who understands your goals and financial needs. Apart from being licensed, they need to be able to answer all your questions about how your life insurance plan benefits you and will work with you until you find the right policy. If you can’t develop a comfortable working relationship with your agent, find someone else.
Choose the Right Life Insurance Riders
A rider is a provision of an insurance policy that helps you customize your coverage to fit your individual needs. Weigh the benefit of a particular rider against the additional premium before you choose.
Select and Purchase a Life Insurance Policy
Life insurance can be purchased online or in-person. Remember, an independent broker (online or in-person) will show you rates and policy options from multiple companies and help you find the right option for your situation, while an agent will only discuss policies that their company sells.
When comparing life insurance policies, compare options of the same type of policy e.g. term life insurance. Once you decide on a policy, make sure to understand the terms and conditions of the policy, how it works, and how it will support your goals.
