Potentially, life is like a box of chocolates. However, according to Faisa Stafford, CEO and president of Life Happens, an industry-funded nonprofit education organization, purchasing life insurance is more like getting coffee at Starbucks. It’s difficult to choose because there are so many possibilities. The situation “can be extremely confusing”, she explains.
According to a poll conducted by Life Happens and LIMRA, one of the most common excuses given for not obtaining life insurance is not knowing how much or what kind of policy to get. One third of Americans (31% to be exact) said they are more inclined to buy an insurance because of the COVID-19 epidemic, according to the 2021 Insurance Barometer study.
These 10 tips about life insurance will clear up any confusion you may have about purchasing life insurance.
First, take stock of where you are financially.
Stafford advises getting an accurate picture of one’s financial situation before deciding on the sort and amount of life insurance one requires.
Think about the measures you’ve taken to ensure the financial security of your loved ones. Money set aside for emergencies, retirement, and workplace life insurance all count. It’s possible that when something unexpected happens, you won’t be as ready as you believe you are.
If you have a mortgage, children, a small business, or a legacy you want to protect, among other things, Stafford says you should talk to a financial counselor about getting life insurance to cover those costs. A financial planner may be one of the perks offered by your company. You can also use NAPFA to locate a fee-only financial planner in your area.
No. 2: Determine the Appropriate Amount of Coverage
Adam Winslow, chief executive officer of Aviva UK & Ireland General Insurance, part of Aviva’s international savings, retirement, and insurance division, argues that consumers frequently under-estimate their need for life insurance. Typically, people simply consider the amount necessary to eliminate their largest debt, such a mortgage. They should, however, think about how much more would be required to assist a spouse or partner with monthly expenditures, child support, college expenses, and other long-term demands.
A good rule of thumb is to have a death benefit on your policy that is 10 times your yearly wage. However, the precise sum you need to be comfortable depends on your own circumstances and objectives. To get a more accurate estimate, see a financial advisor.
Third Piece of Advice: Pick the Right Kind of Life Insurance
Buyers of life insurance frequently weigh the pros and cons of both term life and whole life policies. Term life insurance policies typically cover policyholders for 10, 15, 20, or 30 years. It’s a cheap method to provide protection until you accomplish a predetermined financial goal, like paying off your house or sending all your children to college.
In addition to whole life, various permanent life insurance options exist. Because it lasts for the insured’s entire life, permanent life insurance is more expensive than term coverage. The fact that it increases in value over time makes it more expensive. You can spend the money for anything you like, such as paying the policy’s premiums, saving for retirement, long-term care, or an emergency fund. Your needs and long-term financial goals should guide your decision between term and permanent insurance.
No. 4: Learn the Factors that Determine Your Premium for Life Insurance
Your health and your age are the two main characteristics that life insurance companies use to calculate your premium. According to Winslow, life insurance premiums are at their lowest when purchased at a younger age. This is due to the fact that younger people often have better health and are thus safer insurance bets.
Both the policy’s kind and the size of the death benefit will affect the premium you pay. The cost of a term life insurance premium is determined in part by the policyholder’s choice of term length.
Most term life policies can be converted to permanent life insurance if you can’t afford it right now but eventually will. You can lock in a cheap rate with term life insurance now, and then, if your income rises, you may convert to a permanent policy.
Fifth Piece of Advice: Shop Around for the Best Life Insurance Policy
It is simple to compare life insurance quotes because many providers now give them for free online. Since premiums might vary widely between providers, shopping around for quotes is a smart idea. Independent insurance agents have relationships with multiple carriers and can help you get the best policy for your needs and budget.
Sixth Piece of Advice: Don’t Get Stuck on the Premium
You should make sure the premium for your life insurance policy is affordable, therefore it’s crucial to shop around for the best rate. After all, if you can’t afford the premiums, you won’t have insurance. Nonetheless, cost shouldn’t be your only consideration.
Internal costs can be as significant as premiums when deciding between different cash value life insurance policies. Pay close attention to the guaranteed vs. non-guaranteed sections of any indexed universal life insurance policy example you’re considering. Concerns have been raised by those who fight for consumers over potentially deceptive indexed universal life insurance sales methods.
Check that A.M. Best, Moody’s, and Standard & Poor’s all give the prospective company a high financial stability grade of A. The websites of insurance providers typically provide customer reviews. Your life insurance agent may also be able to offer you with information regarding company ratings.
Seventh Piece of Advice: Be Ready to Respond to Many Questions When Using
An insurance company’s quote for your premium is usually only an estimate. You’ll need to fill out a lengthy application in order to acquire coverage. Questions will be asked about your age, weight, mental health, medical history, and smoking habits, as well as those of your immediate and extended families.
The insurance will also inquire as to your driving history and whether or not you engage in any hazardous occupations or pastimes. Your final insurance premium will be calculated using the data you provide.
No.8 Application Truthfulness
Make sure that your life insurance application has no hidden or misleading information. According to Winslow, honesty is crucial since insurance firms often verify customer data with outside agencies.
The insurance provider can learn anything about you, such as your medical history, drug prescriptions, driving record, and other public documents. You may also need to submit to a medical examination that involves blood and urine testing.
No. 9 The Process Doesn’t Have to Hurt
The application process need not involve extensive questioning and probing. Stafford claims that an increasing number of insurance companies are offering no-examination life coverage. Instead, they use data modeling and external resources to validate the information applicants supply and assign them to a risk category.
It’s important to know that there are several distinct kinds of no-exam life insurance:
Policy of swift underwriting approval. It’s common for insurance providers to inquire about your medical history and medicine prescriptions from outside sources when you apply for this type of coverage. The costs are comparable to those of a policy that requires a medical exam for underwriting purposes.
Reduced complexity. A few simple questions are asked of potential policyholders, and very little information is gathered from outside sources. The rates for these insurance are typically higher because less information is available about the policyholder.
Insurance policies that are guaranteed to be issued. This is the most expensive option for purchasing a no-exam coverage, but it also requires no medical history or physical. Guaranteed issue life insurance policies cannot be declined.
No. 10 Advice: Secure Short-Term Insurance
In most cases, you can secure provisional coverage by including a check for the first premium payment with your application, even if the underwriting procedure for the policy you’re purchasing will take several weeks or longer. While waiting for the application to be processed, at least you’re covered and can rest easy. Inquire about this choice from your life insurance provider.