Life insurance can form a vital part of your family’s financial stability and well-being but, if you’re like most people, you may find the thought of shopping for the right type of coverage a little daunting. Fortunately, these eight simple steps can guide you along the way.
Decide on the type of life insurance you need
Before you start shopping for a policy, you need to decide which kind of life insurance you need. Life insurance covers multiple risks associated with your family’s finances, such as to fund your dependents’ medical expenses or leave a nest egg for your heirs. But it’s important to determine which risks are most important for your family before purchasing a policy, and the right one depends on your personal situation. If you have dependent children, you’ll need life insurance to ensure your children are financially secure after you pass away. Some parents would prefer to have the life insurance pay for their children’s college education or assist them with buying a house, but this type of coverage may not be necessary for you and your family.
Find the best rates
If you’re among the millions of Americans who don’t have any life insurance at all, start with the top of the scale. Nearly one-third of Americans age 60 and up have no life insurance at all, and having too little coverage on the books can be a major financial risk. The life insurance industry estimates that a healthy 30 to 35 percent of the 65 and up population has an insufficient amount of insurance, and people 65 and older have the highest risk of needing life insurance in retirement. (Not having sufficient life insurance has been linked to the possibility of having to take on a nursing home expense.) The lowest-cost products on the market are not necessarily the best life insurance products for you, as the industry is a complex one.
Consider your family’s needs
Consider your family’s needs and your personal situation. Will your death benefit need to be split among children and relatives? Will there be any educational expenses to be paid? Will you leave a personal or household legacy? Are you prepared to provide a monthly living benefit for family members? Identify potential coverage Once you’ve assessed your needs and your personal situation, identify your needs and your preferred coverage options. The key here is to get a variety of coverage under one roof. If you opt for term, consider the pros and cons of purchasing a whole life, a universal life, or a permanent life insurance policy. However you choose, buying insurance is expensive, so be sure to do your homework before making a final decision.
Choose the right amount of coverage
What kind of coverage is right for you depends on a number of factors, including how much risk you’re willing to take on, what type of life you want to live, your lifestyle, your personal preferences and your family’s health. For the most accurate estimate of your needs, take a look at how you plan to use the money and what kind of risks you’re willing to take. To get started, you can use a web site like LifeExpert.com or call your local broker or insurance company to ask for a fee-only financial planning consultation. Select a policy that suits you Ask yourself a few questions to help you select the best type of insurance policy for your particular needs.
Figure out how to pay for it
When considering the purchase of life insurance, it’s important to take into account the other important financial pieces of your overall financial plan. This will ultimately help you to make an informed decision about life insurance coverage, and will allow you to select coverage that’s best for your situation. “Know your situation and your unique financial needs before you start shopping for life insurance coverage,” says Sean Quinn, founder of Life Insurance By Sean. “This is critical, as you don’t want to overspend on something that’s not going to benefit you or your family in any way.” Quinn recommends that consumers start with a thorough review of all financial assets, liabilities and income sources.
Choose a company with a great reputation
Choosing an insurance company is the first step to getting life insurance in place. Avoid companies that aren’t focused on customer satisfaction or simply can’t give you the insurance policy you need. Consider asking friends and family for referrals, go to web sites such as Snagajob.com, or call your local chamber of commerce to find the right company for you. Take the required number of classes Find out as much as you can about the life insurance industry and what it takes to buy a policy. Life insurance policies are a complex investment, so take classes that will teach you all the basics and requirements. Certified life insurance agents are highly trained and are a good source for finding information and taking the class if you can’t find time to take them on your own.
Compare coverages and limits
Your first step in buying life insurance is simply to start looking at different policies. The good news is that you can compare the current state of the industry, so you’ll get a good idea of what each company is offering without having to do any digging. “Start by going to an online shopping site, like kelloggs.com, for a comparison,” says Tim Kraemer, president of The National Agency, a national insurance agency in Woodbridge, VA. If you opt for online shopping, choose “compare at” and “learn more” from the landing page that pops up. From there, click on “select home” or “experience” for each product you’re interested in. This is where you’ll be able to find information about coverage types and other customer service considerations.
We’re fortunate to live in a society that’s remarkably well-equipped to prepare for, overcome, and plan for many life-threatening events. If you’re not yet familiar with life insurance, or would simply like to make sure you’re getting the coverage you need and will enjoy, take a look at the available products or learn more about the services offered by a reputable company such as LPL Financial.