10 Important Tips for Buying Life Insurance
Tips for Buying Life Insurance | Looking to buy life insurance for the first time? Then asking yourself this questions:
- How much life insurance do I need?
- What kind of life insurance policy is best?
- Which life insurance company should I buy from?
Shopping for life insurance can become an overwhelming task. There's no question that buying life insurance for the first time, like any other new experience, can be more than a bit daunting.
Below are ten important tips for buying life insurance, especially if it's your first time.
Tips for Buying Life Insurance
1. Know Why You Need Life Insurance
Life insurance is a serious investment that shouldn't be made on the spur of the moment. Don't buy a policy just because someone says you should. Many people hear ads about life insurance so many times that they begin to feel an instinctive concern about needing life insurance. The truth is, however, not everyone needs life insurance.
|Buying Life Insurance|
The purpose of life insurance is to provide financial support for your dependents if you are no longer around to do it yourself. If you don't have any dependents, you probably don't need to spend money on life insurance. If you are contributing significantly to the financial well-being of someone in your life, you think about protect from any financial gaps that might occur if you no longer able to provide the same support. The key is to understand why you need life insurance before you begin shopping for a policy.
2. Understand the Type of Life Insurance Policy You Need
There are two basic types of life insurance policies: life and whole life. Term life insurance policies last for a specified period of time. Term life is less expensive than whole life because it usually expires before the benefits are used.
Whole life insurance lasts from the day you the policy until the day you die, no matter. A whole life policy is more expensive because the coverage could last a few years or several decades. Whole life policies can be borrowed against at a high interest rate, while term life policies.
3. Know When to Choose Term Life Insurance
If you are in a situation your dependents will not rely on you financially forever, your best bet is probably a term life policy. For example, many parents choose term life policies that are in effect until their children move out and become financially independent. Once kids are, there is no reason to continue paying for life insurance. Your beneficiaries will rely on your contributions.
4. Know How Much to Buy Life Insurance
Understanding the potential needs of your beneficiaries can also help you decide how much life insurance you should have. Don’t follow any “rule of thumb” guidelines you may read. Your needs are specific to you. Your decision will depend on the math.
How much money do your dependents need each year and for how long? Because your children are likely different ages, that number is different for each beneficiary. Calculate the needs of each dependent annually, multiple times the number of years support is needed and then add those numbers together so all dependents have what they need.
The amount of money your family or heirs will receive after your death is called a death benefit. To determine the proper amount of life insurance, online calculators can be helpful. You can also get a ballpark figure using any number of formulas. The easiest way is to simply take your annual salary and multiply by 8.
5. Take Advantage of The “Free Look” Period.
Even after your policy issues, you'll typically have what is called a free look period. During this time, you'll have a certain number of days in which to make changes to your policy, or even reject it altogether. Be sure to ask your company representative how long your free look period is and when it begins. If for some reason you don't feel the policy is right for you, this is the time when you can change your mind with no financial obligation.
6. Compare Similar Life Insurance Products.
When getting price quotes on life insurance, be sure that you are comparing similar products. Because term life generally has lower premiums than a permanent life policy, there can be a big price difference for a $75,000 term policy compared to a $75,000 permanent policy. Depending on your coverage needs, it's important to look at every angle, not just the monthly premium.
7. Understand that life insurance is designed for protection.
Your main purpose for getting life insurance should be to protect your beneficiaries financially in the event of your death. While permanent life insurance policies have the potential to earn cash value over time, they are not meant as investment vehicles.
Life insurance is designed to provide families with financial security in the event of the death of a spouse or parent. Life insurance protection can help pay off mortgages, help provide a college education, help to fund retirement, help provide charitable bequests, and, of course, help in estate planning. In short, if others depend on your income for support, you should strongly consider life insurance.
8. Enhance your coverage with policy riders if necessary.
When you select a policy, ask your company representative about the types of policy riders that may be available to you. Riders or endorsements are ways in which you can customize your policy to meet your needs and budget.
9. Buy from a reputable life insurance company.
Your life insurance policy is meant to financially protect the people you love when you are no longer here to do so yourself. Do some homework on the life insurance company that you are considering buying from and learn more about how to select a reliable life insurance company.
An insurance policy is only as good as the company that backs it.
You want to make sure you choose a company you can rely on to be around for as long as you'll need your coverage, and one that invests premiums in a highly prudent manner in order to pay the claims of its policyholders.
That is 9 Important Tips for Buying Life Insurance. The last important tips for buying life insurance is looking for your deep heart. Is it important?