How To Buy Life Insurance
How To Buy Life Insurance
By Life Quotes, Inc. Staff
Most people buy life insurance to ensure their loved ones are protected financially in the event of their death. But people don’t often realize that although paying funeral expenses and replacing income are two very important reasons to purchase a life insurance policy — you can also use life insurance to pay for a home, plan for retirement or prevent tax penalties when you transfer an estate.
Whatever your situation, it’s important to know which policy fits your particular needs and those of the people you love. The Life and Health Insurance Foundation for Education, a non-profit consumer insurance education organization, offers these tips for buying life insurance.
Tips for buying life insurance
Consider those who rely on you financially, including your spouse; children, parents or other loved ones. You should periodically re-evaluate your insurance needs whenever there is major life change, such as getting divorced, buying a home, or changing jobs.
“A life insurance policy should be reviewed when there are major times for financial change in your life,” suggests Jack Dewald, Chair-elect for the Life Foundation. “Even if there hasn’t been any major changes in your life, you should reevaluate every five to seven years to see what you have and what you need and what you don’t need anymore.”
How much is enough?Ask yourself how much money your family will need to cover living expenses and how much they will need over the long-term to maintain their standard of living. The Life Foundation provides an interactive calculator at www.lifehappens.org/lifecalculator to help you estimate your needs.
Does it fit your needs and your budget?Research term and permanent policies to figure out what kind of life insurance is right for you.
Find an expert that can explain the different types of life insurance available. You can find an insurance agent through referrals from someone you trust such as friends and family.
Have your agent or broker put together a life insurance needs analysis. A needs analysis is a personalized illustration of your current and future financial needs. The worksheet would include: Income needs, expenses, existing assets and insurance, new insurance amount needed, rate of return flowchart, summary of rates of return, a comparison between rates of return upon death, annual rates of return by age, assumptions or client and insurance policy information.
Research the insurance company or the broker you plan to work with to determine its financial stability.You can check out an insurance company’s financial strength rating at A.M. Best, Fitch, Moody’s and Standard & Poor’s websites.