No one should buy any product without at least some idea of what they want and what they’re getting, and life insurance is no exception. While you may benefit from the advice of a broker or sales representative, it is always a good idea to know something on your own in order evaluate their suggestions. Here are three things you will want to consider when buying life insurance:
1. Know Your Needs
When you come right down to it, no one understands your financial needs better than you. To figure out how much insurance you will need, add together your debts plus what it would take to replace up to a year of income. You should also add in the cost of an item no one likes to think about (but which your family will have to) and that’s your estimated funeral costs. The resulting sum will allow you to avoid getting suckered into purchasing an exorbitant policy.
2. Term Insurance Versus Permanent Insurance.
A term insurance policy is one that provides you with protection only and does not offer a savings component. If this is your first insurance policy purchase, you probably will be able to cover all your financial needs with term life insurance, which is also usually cheaper. Because permanent insurance such as whole life give the insurance companies better profit margins, your sales representative may try to steer you in that direction. You can always upgrade later, so start out with something simple and inexpensive and then adjust your policy according to changing circumstances as time passes.
3. Shop Around
You wouldn’t buy a major purchase like a house or a car without comparison shopping and you should take insurance just as seriously. Before committing to anything, see what others will offer for the same coverage, as prices can vary surprisingly from one insurance company to another. There is simply no substitute for doing your homework and such things as what type of riders, exclusions and other bells and whistles are on the policy make an enormous difference in how much your premiums will be.
Buying insurance shouldn’t be complicated, and if it seems complex and hard to understand that should be a major warning sign to slow down and do more research before signing anything. With a little commonsense caution getting the insurance you need at a price you can afford shouldn’t be a problem.