Buying Life Insurance for the First Time? Here is What You Need to Know
- Author: Kelly Cooke
- Posted: 2024-03-19
With so many life insurance options flooding today's marketplace, it is understandable if you are confused when making that purchasing decision for the first time. Many people shy away from buying life insurance initially simply because it is too confusing to wade through the options. However, you are remiss if you are not protecting your family through the use of life insurance.
Here are a few tips to help first-time buyers navigate the road of purchasing life insurance.
Detail Your Current and Future Financial Situation
Before you decide how much coverage you need, you need to have a clear picture of your finances. For example, do you have a healthy emergency fund built up to cover your family in the event of a disaster? Do you have an ample amount of retirement savings? A financial planner can help you to assess your personal financial situation so that you can decide how much life insurance coverage you need. This will help to guide your decisions as you begin the process of taking out a policy.
Understand Your Coverage Needs
Once you have a good idea of your financial picture, you need to understand your coverage needs. This is when the number of dependents and their ages come into play. Factors that you need to consider include caring for a spouse, supporting children as they age, paying for college educations, and more. As your children get older and can support themselves, you will likely want to reduce your policy coverage. Your spouse's financial picture and income also factors into the amount of coverage that you need.
Investigate the Different Types of Life Insurance
One of the most important decisions that you will make during this process is what type of policy you will purchase. The two primary types of life insurance are known as term or whole. A term life policy offers coverage for a set amount of time designed to protect you until you reach a particular financial milestone. For example, perhaps you choose a term policy of 20 years to get your children through college or until your mortgage is paid off. In contrast, a whole life policy offers lifelong coverage. While this is more expensive than term life, it builds value throughout your life, acting as another element of your long-term financial goals. You can also choose to purchase a term life policy that will eventually convert to a whole option.
Understand What Determines Your Rate
There are a number of factors that influence the rate that you will pay for your coverage. The two primary influences are your age and overall health. The younger and healthier that you are, the less money that you will pay for the coverage that you want. This is because you are considered to be less risky to insure. Your rate will also depend on the length of the term and what type of policy that you choose.
Compare Policies
In the past, you needed a professional expert to guide you through the process of comparing different policies. The rise of the internet has changed the landscape of life insurance policy shopping, giving buyers the opportunity to compare rates with just a few clicks of the mouse. You would be wise to compare several policies. Be sure to get quotes from several different options and then take the time to read the fine print. Remember that a policy is more than just its price.
Be Ready to Answer Questions and Submit to a Medical Exam
Once you have narrowed down your options, you need to apply for the coverage. Be read to answer a litany of questions regarding your age, weight, medical history, tobacco use, driving record, job duties, and more. All of this will determine how much of a risk you are, impacting the rate that you will be offered for the policy of your choice. Some insurers will also ask you to submit to a medical exam.
While nobody wants to think about buying life insurance, this coverage is a necessity if you have a family that depends on you financially. You will sleep better at night once you have this policy in place.
