Life insurance can be overwhelming to purchase – and that’s even if you know the basics. In this post, we break it down bit-by-bit how to choose your first policy. From understanding how to evaluate your current financial status to choosing your ideal plan and comparing quotes, our guide covers everything.
At the end of this article, you should be ready to make an intelligent decision on your own coverage with confidence! Ready? Let’s dive in!
Assess your financial situation
Understanding your financial situation will help you choose the appropriate level of coverage and also customize a policy that meets your specific needs.
To begin, take stock of all of your assets – both tangible and intangible. Include everything, from your home equity to investments and retirement accounts. Also think about any debts you may have, such as car loans or student loans.
Next, try to figure out your annual income and future earnings potential. You need to know how much money you’re earning now and what your likely salary will be in the future. If you’re not sure, ask your employer or a financial advisor.
Once you have this information, it’s time to calculate how much money you need to cover your annual income for the rest of your life. The goal here is to determine how much you can afford in life insurance premiums based on your current financial status.
Choose a life plan
When you are ready to start protecting your loved ones, it’s time to determine which type of life insurance is right for you.
There are two basic types of life insurance: Whole of Life (or permanent life insurance) and term life. The former protects your designated beneficiaries for the rest of your lifetime, meaning they are guaranteed to receive a payout in the event of your passing as long as you keep your plan active till the end.
On the other hand, term life insurance protects your loved ones for a set period of time, usually 10-30 years. Other plans worth considering are life cover with critical illness, mortgage life insurance and family protection among others.
Remember that the more expensive the policy, the higher the coverage. So if money is tight, go with a cheaper policy first. If you decide later that you need more coverage, you can always upgrade to a more comprehensive policy.
Compare rates before you buy
Once you know what your budget is and the plan to take out, it’s time to start shopping around. The idea is to compare rates from different companies and see which option offers the best value for your money.
While at it, be sure to factor in premiums, annual increases, and additional benefits such as death benefits for children or lifetime protection.
Don’t be afraid to ask questions when interviewing prospective insurers. Ask about their qualifications and how they rate in customer satisfaction. Also inquire about discounts and special offers that might be available.
Do not hide any crucial information during application
During life policy application, you may be tempted to keep some of the details about your financial situation hidden from the provider. This is a grave mistake.
Your life insurance provider needs to know your current and expected income, assets, liabilities, and retirement plans in order to provide you with a proper policy. It’s also important for your provider to know about any medical conditions you may have.
Many life insurance policies have exclusions for certain diseases or conditions, so it is important to get complete information about what is covered.
Remember, if there are any discrepancies in your information or any changes that occur in your life which would affect your coverage, please let the life insurance provider know right away. Your loved ones will thank you should the inevitable strike.
Review your plan regularly
Your life insurance needs can change as you age and any time you hit new life milestones, such as having kids or retiring. For this, be sure to review your coverage periodically to make sure that it still meets your needs.
Other reasons you might want to evaluate your policy regularly is to ensure it remains in compliance with state and federal regulations. You can also consider getting supplemental life insurance if you have other exposures, like mortgage, car loans, or when children join college.
As you start to think about your future, one of the most important decisions you will make is what kind of life insurance policy to take out. We sincerely hope that our tips will help you choose the right policy for your family and make the process as easy and stress-free as possible.
As always, if you have any questions or would like help getting started, remember that we are here to help! Good luck!