Buying life insurance can be a scary venture. There are countless options to choose from and you are forced to think about your own death during the entire process. If you are a first-time buyer, then the entire process may seem daunting to you. You might have questions like, "How much do I need?" or "Where should I buy insurance from?"
It’s important to realize that purchasing a life insurance policy will protect your loved ones, and ensure their security if anything were to happen to you.
Below are a few tips that will help you better understand life insurance and how to purchase life insurance. The following can help make the entire process smoother, and will also help you be better prepared to decide which life insurance is best for you.
1. Understand Your Needs
For many people, the thought of a life insurance policy comes when a life altering event takes place. Things like the death of a family member, getting married, having a baby, buying a house, etc. Other people are just trying to prepare for a secure future and unexpected changes. Either way, it is important to know what your needs and goals are in order to determine which type of life insurance policy is best for you. You can always buy a term policy first if you aren't ready for a life insurance policy, but it is better to start as young as possible.
2. Finding The Right Policy
Many first timers think that all life insurance policies are similar. That is not true. There are many different types of policies such as whole life insurance, term life insurance, universal life insurance, and variable life insurance, among many others.
The two main policies are term life insurance and whole life insurance, which covers you until the day you die and the benefits are transferred to the appointed beneficiary. In term life insurance, the policy covers you for a certain period of time. If you outlive this period, the policy expires, and you decide whether you want to repurchase another policy or not. Whole life insurance is typically much more expensive than term life insurance.
3. Coverage You Need
The next question you need to ask yourself is how much coverage you need. Some experts say that your death benefit (the amount of money your family or beneficiary will receive after your death) should be at
least six to eight times your annual salary. There are also online calculators available to help you decide what amount is most suitable for you.
While eight times your annual salary sounds like a good idea, it’s very hard to stick to it. You need to make sure your insurance policy covers your funeral costs, mortgage payments, loans, educational expenses, and still leave enough money so that your loved ones are not effected financially by your death. Compare insurance options here.
4. Learn The Language
There are a lot of terms that can sound confusing to you if you are new to insurance. It's better to seek guidance and ask questions about terms such as premium beneficiary and dividend for instance, so you are clear about what you are being offered. It can make the entire process much simpler if you understand your life insurance policy.
5. Choosing The Insurance Company
Your life insurance policy is only as good as the company you buy it from. Many first timers believe that all companies are the same and offer similar policies; this is not the case. You need to make sure your company is not charging you too much for your policy. You need to make sure that the company you choose for your life insurance has a solid background and won’t go under after a few years. Check online for a rating and do your research beforehand so you can be sure that you can trust the company with your money.
While you're planning for the future, check out our retirement calculator here!
6. Speak with an Advisor
If you are a first-time life insurance buyer, you might not have all the information required to make the right decision while choosing a life insurance policy. You can look for an advisor within the company or online, who can answer all your questions and give you the best advice to follow. They can help you understand a number of things that might end up making your family’s future even more secure.
Buying life insurance requires time, effort, and asking important questions. You can always get help when you are stuck, which can help make the entire process a lot easier for you. Once you buy a life insurance policy, you can breathe a sigh of relief knowing you are helping your loved ones become financially secure for the future.
In Summary
Although purchasing life insurance, and understanding life insurance, can seem like a scary venture, it is an important decision that will help your loved ones in the event that anything was to happen to you. This article provides six tips for purchasing life insurance to help you better understand the best options for you.
