How to Buy Life Insurance
Buying life insurance is an easy way to protect your family
after you're gone. If you know what to look for, you can get great
coverage at a price you can afford.
Why buy life insurance?
Topping the list of reasons to buy life insurance is the financial
protection life insurance offers. If you're single and just starting
out, you may not need as much life insurance. But as you take
on more responsibilities and your family grows, your need for
life insurance increases. The proceeds from a life insurance policy
can replace the income lost to your family upon your death. You
might also want to buy life insurance to pay off debts and expenses,
leave money to charity, and cover final and estate expenses.
Choose term or cash value
There are two basic types of life insurance: Term Life Insurance,
which provides life insurance coverage for a specified period
of time (the term), and Cash Value (Permanent) Life Insurance,
which combines a death benefit with a cash value component. Cash
value insurance offers lifetime protection, while term insurance
may be the most affordable option if you're buying life insurance
mainly for the financial protection it offers, and your need for
life insurance is temporary (until your children leave the nest,
for instance). Some term policies (called "convertible")
will permit you to exchange the term life insurance policy for
a permanent one at some point.
Decide how much coverage you'll need
The amount of life insurance protection you should buy depends
on how much income your survivors will need, how much you own
and owe, and the amount of other life insurance available to you.
If you're married, both you and your spouse should consider buying
life insurance. One of the easiest ways to estimate how much life
insurance protection you should buy is to use a life insurance
needs calculator, contact us immediately to give you more details.
Pick a number between 1 and 30
Term life insurance is usually offered for periods ranging from
1 to 30 years. Consider choosing a term that matches your need
for life insurance protection. For instance, if your main reason
for buying life insurance is to protect your 7-year-old twins
until they're out of college, you'll want to buy a policy with
a term of at least 15 years.
How much will it cost?
How much you pay for life insurance will depend on a number of
risk factors, including your age, your health, whether you use
tobacco, your family health history, and the type and amount of
life insurance you're buying. Keep in mind that the premium you're
quoted initially will increase later. For instance, when you buy
term life insurance, rates are guaranteed only until the end of
the term (annually for annual renewable term or at the end of
a specified number of years for level term). While most life insurance
policies can be renewed at the end of the term, you'll pay a higher
premium for coverage.
Shop around
When comparing quotes for life insurance, make sure that the insurance
coverage you're comparing is similar. And remember, any policy
that you buy is only as good as the company that issues it. Find
out what rating the company has received from major ratings services,
such as A. M. Best or Standard & Poor's. These companies evaluate
an insurer's financial condition and claims-paying ability. The
company giving you a quote should provide you with this information.
You can also contact your state's department of insurance to find
out more about an insurer's record.
Submit an application
Once you're ready to purchase a life insurance policy, you'll
fill out a life insurance application that contains questions
about your current and past health history and lifestyle. You
are not always required to take a medical exam, arranged and paid
for by the insurance company. The answers you give on your application,
along with the results from the medical exam and your past health
history, will help the insurance company determine whether to
offer you a policy, and if so, at what price. It is important
for you to understand that by submitting an application you are
not buying anything, the application is the main tool to be used
by the insurance company to determine if you qualify for the desired
coverage and plan, if you do qualify, then an insurance policy
will be issued and that is when your coverage begins.
Learn the lingo
Maybe a life insurance contract isn't as exciting as a best-selling
novel, but read it anyway. Policy provisions, the amount of benefits,
the premium, and other charges you'll pay will be listed along
with other important information such as the beneficiaries you've
named and the premium guarantee period. Make sure you understand
everything in the policy. Under the laws of your state, you may
have a "free look" period (typically at least 10 days)
during which time you can cancel the policy without penalty. For
additional information, please contact us and we'll be glad to
help you and answer any additional questions that you may have.
*Please note that this description/explanation is
intended only as a guideline.
