Though it might seem morbid to think about your own death, not to mention what happens after that, it’s vital for every person, especially one with a family, to think about how your passing will potentially affect the ones closest to you.
That’s why it’s crucial not only to have a will but also to consider buying life insurance. And below, we get into the detail of the latter.
Unfortunately, it’s not easy to get the best deal. Due to the abundance of offers and providers, anyone doing it for the first time can sooner rather than later get overwhelmed. Luckily, there’s a set of rules you can follow to make the whole process smoother.
From assessing your situation and calculating a potential insurance rate to comparing different companies, thinking about the desired policy type, and preparing for the process – in this article, you’ll find more information on how to buy life insurance.
Assess Your Situation
The first question you have to answer is, “why do I need life insurance?”
The most common reasons people opt for this type of insurance are to protect their loved ones in case of death or cover end-of-life expenses. It’s also a crucial element of comprehensive financial planning.
Once you know why you want to contact an independent Medicare insurance broker, you should examine your current financial situation.
This will help you determine both how much life insurance you need and what type of policy is the best fit. You should consider the following factors:
- your age,
- your overall health,
- your profession (is it high risk?),
- whether you have any preexisting medical conditions,
- your financial dependents,
- your annual income,
- your current debts and expenses,
- your long-term financial goals.
Calculate Potential Insurance Rate
When you know why you want life insurance and have assessed your current financial situation, you can start calculating how much life insurance you need. While this might seem like a daunting task, there are numerous life insurance needs calculators available online that can help you.
In general, it’s recommended that you buy a policy that’s worth 5-10 times your pre-tax annual income.
However, this is just a rough estimate, and your specific needs might be different. Some other factors to take into account when calculating how much coverage you need include:
- your mortgage balance,
- your spouse’s income,
- your children’s education expenses,
- the funeral and burial costs,
- any other debts and financial obligations.
Compare Different Companies
With the advent of the internet, there are now numerous ways to compare different life insurance companies and policies. Of course, you can always consult with a financial advisor, but you can also do your research online.
When comparing different companies, make sure to consider the following factors:
- Financial stability: You want to make sure the company you choose is financially stable and will be able to pay out your policy in case of your death. You can check a company’s financial stability rating with agencies such as Standard & Poor’s and A.M. Best.
- Customer satisfaction: Another important factor to consider is customer satisfaction. You can check customer satisfaction ratings with the Better Business Bureau (BBB) and J.D. Power.
- Policy offerings: Make sure to compare the different policy offerings of each company to see which one best fits your needs. Some companies might offer more coverage options than others.
- Pricing: Of course, you also want to compare pricing to make sure you’re getting the best deal. Keep in mind that more expensive is not always better. You want to make sure you’re getting a good value for your money.
Think About The Desired Policy Type
Once you’ve compared different life insurance companies, you can start thinking about the desired policy type. There are two main types of life insurance policies: term and whole life insurance.
Term life insurance is the most popular type of policy and is usually cheaper than whole life insurance. A term life insurance policy provides coverage for a specific period of time, typically 10-30 years.
If you die during the term of the policy, the beneficiaries will receive a death benefit. If you don’t die during the term, the policy will expire, and your relatives will not receive any benefits.
Whole life insurance is a type of permanent life insurance that provides coverage for your entire life. Such insurance policies typically have higher premiums than term life insurance policies because they provide lifelong coverage.
Some other types of life insurance policies to consider include:
- Universal life insurance: A type of permanent life insurance that offers flexibility in terms of premium payments and death benefits.
- Variable universal life insurance: A type of permanent life insurance that offers both a death benefit and the opportunity to invest in stock and bond market securities.
- Indexed universal life insurance: A type of permanent life insurance that offers both a death benefit and the opportunity to earn interest based on changes in an equity index, such as the S&P 500.
- Second-to-die life insurance: A type of joint life insurance policy that pays a death benefit only after both insured parties have died.
Prepare For The Application Process
Once you’ve chosen a life insurance company and policy type, you can start preparing for the application process. The application process can be time-consuming, so it’s important to have everything you may need at hand.
When applying for life insurance, you will be required to provide some personal information, such as your name, date of birth, Social Security number, and contact information. You will also be asked about your health history, family health history, lifestyle choices, and finances.
To speed up the process, make sure to have the following information handy:
- your personal information, including your Social Security number,
- your family health history, including any hereditary conditions,
- information about your current health, including any preexisting medical conditions,
- information about your lifestyle choices, such as whether you smoke or drink alcohol,
- information about your finances, including your annual income, debts, and assets.
Final Thoughts
Buying life insurance is a vital part of financial planning, but it’s not always easy to get the best deal. What’s more, it is not a decision that should be taken lightly.
As such, it’s important to do your research and compare different companies and policies before making a decision.
When buying life insurance, make sure to assess your situation, calculate how much coverage you need, think about the desired policy type, and prepare for the application process.
By following the tips above, you can make the process smoother and find the best life insurance policy for your needs.
