What You Need to Know When Buying Life Insurance

Life insurance is a very complicated subject for many. When it comes to buying life insurance people are often hesitant to make a decision because they’re scared of making the wrong choice. That’s why buying life insurance for the first time can feel overwhelming and a little daunting. But it does not have to be that way. Buying life insurance is a major financial commitment that needs careful consideration to make sure that you buy the policy that meets your individual needs for the rest of your life. To make it an easy and painless process we have created a checklist to guide you through the process to help you make the right decision.

Life Insurance Checklist

• Determine Whether You Really Need Life Insurance

This is the first question you should ask yourself. Because although Most people do need life insurance, but not everyone. If someone is financially dependent on you or you have a spouse, children, parents or even business partners who would be affected financially if you were to die, you should consider buying life insurance. Life insurance can be very useful even if you think you don’t need it. You can use life insurance to leave a legacy, pay for estate taxes, or even cover your final expenses.

• Calculate How Much Coverage Is Required

Once you figure out if you really need life insurance; you should figure out how much of life insurance coverage is needed. There are many factors that will decide the amount of coverage you will need. You should consider your immediate financial obligations and future income required for the family to continue living a comfortable lifestyle.

You can use our Life Insurance Calculator to calculate how much life insurance is the right amount for you.

One rule of thumb is to have a policy with a death benefit equal to 10 times your annual salary. But your Insurance Advisor can help you come up with a more-precise figure after doing a need analysis because your own situation and financial goals might require that you have more—or less—than that amount.

• Figure Out For How Long You Need The Coverage For

Decide if you need coverage only for a certain period of time or do you want guaranteed life insurance coverage that will last until you die, no matter when that happens. Term life insurance provides coverage for the needs that are short term temporary needs like mortgage, funds for kids’ university education, car loans, business loans etc. whereas Permanent life insurance is a viable coverage option for permanent needs like funeral expenses, estate taxes or to leave a legacy for your loved ones.

• Understand What Type Of Policy You Need

Whether term life or permanent life insurance is better for you will depend on your own personal needs and financial goals. Always understand the difference between Term and Permanent Life Insurance to figure out which insurance policy is Better For you – Term Or Permanent?. Term life insurance lasts for a set amount of time, is very affordable and can protect you during a critical period of your life. It is an affordable way to get coverage until you reach a certain financial milestone, such as paying off your mortgage or putting your kids through college. Permanent life insurance provides lifelong coverage that lasts for your entire life, is more expensive, but will cover you all the way until death. It also builds cash value that can be used to cover emergencies, supplement retirement income, or help pay for long-term care.

• Make A List Of Your Financial Goals

Make sure to make a list of your short-term as well as long-term financial goals so that your financial advisor can make sure that your insurance policy fits together with your personal needs as well as future financial goals and obligations.

• Understand What Factors Will Affects Your Life Insurance Premiums

There are many factors that will affect your life insurance premiums. The main factors life insurance companies consider when determining the premium are your age, gender, health, family history, smoking status, type of policy and amount of coverage.

The younger you are the cheaper it will be because when you are young, you are healthier and therefore less risky to insure. Smokers pay more for life insurance as compared to non-smokers. Term life insurance is always cheaper and affordable compared to permanent life insurance policy.

• Shop Around For The Best Rates

Buying life insurance is almost the same as buying most other products. There are a lot of products available with different features and different prices. So make sure to shop around in order to get the right product at the best price. We at Family Care Insurance will evaluate your specific needs and will find you the best option from the top-rated insurance companies. We will do all the hard work so that you don’t have to, saving you a lot of time, effort and money.

• Focus On The Right Coverage, Product Features And Benefits Rather Than The Lowest Premium

Many people will just focus on the premiums while shopping around for life insurance but keep in mind that the price shouldn’t be the only factor you consider. While it is important to shop for an affordable policy that fits in your budget, it’s also important to consider what you’re getting in return, in terms of coverage. Life insurance policies can be very complicated, that’s why it’s always advisable to consider their features and benefits along with the price. For example, term life insurance is cheaper than permanent life insurance because it will only cover you for a certain period of time while permanent life insurance will provide lifetime coverage along with an investment feature that will accumulate cash values inside it.

• Select A Trusted And Experienced Insurance Advisor/Broker

Finding a professional and trusted Insurance Advisor to work with is a very important part of your planning process. Focus on getting sound and honest advice rather than the lowest premium. Your insurance advisor can do a financial need analysis and make better recommendations for a policy that will fit your financial needs. Get personal advice from a trusted and licensed independent broker who works with several insurance companies and can help you find the best coverage at the best price.

• Schedule A Meeting, Request Quotes And Compare Different Quotes

After you select your insurance advisor, schedule a meeting to discuss your needs and financial goals. By this time you know which type of life insurance policy you want and can ask them for quotes on that type of policy. Get at least three insurance quotes for the same type of product and compare them and see which one is a best fit to satisfy your needs and financial goals. Make sure to compare current premiums, features, special benefits and guarantees and premiums at renewal to make an informed decision. Ask if you have any questions and understand how the policy will work. Understand the policy illustrations and compare policies to see which one best suits your lifestyle.

• Understand The Application Process To Complete The Application

Once you decide the type of policy you want you will need to complete a life insurance application. Application can be conveniently completed and submitted online, as a PDF, or in person, using a hard copy of the application. Make sure you understand what documents and information is required to complete the application and be ready to answer a lot of personal questions. You will need a photo ID, and your banking information to complete the application. You will have to provide accurate information about your age, health, weight, height, smoking status, your family history, your occupation, your income, financial history, driving records, risky hobbies and any life insurance you already own. This information is used to determine what your actual insurance rate will be.

• Be Truthful On Your Life Insurance Application

Make sure you provide accurate information on your application because failure to provide accurate and complete information can invalidate your policy. Be absolutely honest about all your responses and tell the truth. Providing misleading information may cancel your policy and the insurance company may refuse to pay the death benefit to your beneficiaries. Make sure that all the information provided is accurate before signing the application and keep a copy of the completed form for your records.

• Complete A Health Questionnaire And Or Medical Exam

After submitting your application, you will be required to complete a health questionnaire or to take a medical exam depending upon the type of policy (unless you choose to purchase a no medical exam life insurance policy instead). Make sure the information you provide is accurate and complete. Misleading or incorrect information can invalidate your insurance policy.

• Understand The Underwriting Process

Once the application is submitted, we send it to the insurance company and that’s when the underwriting process begins. This is where the insurer decides what the amount of your premiums will be. The insurer might look at some additional factors and details to make this decision because many things can affect your rate. They will gather your medical records; check your driving history, your occupation, your family history and other factors that may affect your rate and eligibility. Based on all the information, your application for insurance can be approved as preferred (lower rates), regular (normal rates), and rated (higher rates) or declined (no coverage can be issued).

• Review Your Life Insurance Policy

After the underwriting is complete and your application is approved you will receive your policy contract. Review your policy thoroughly and ask your Insurance advisor if you have any questions. You will have at least 10 days to review it and change your mind.

• Keep Your Life Insurance Policy In A Safe Place

It is your responsibility to keep your life insurance policy in a safe place, and to know where your policy is so you can refer to it whenever required.

• Inform Your Beneficiaries And Your Lawyer

After the policy is issued you should inform your beneficiaries about the details of the plan, where you stored the policy, how to contact your insurance advisor or company and how to make a claim. Your lawyer will need policy details to advise you about completing your will and estate planning.

• Review Your Life Insurance Policy Periodically

Your life insurance needs will change over time, and so should your coverage. It is advisable to review your life insurance policy periodically. Reviewing your life insurance every year helps make sure your policies are up to date and still meets your needs and that additional coverage is added if needed.