10 Best Tips If You’re Buying Life Insurance For The First Time

Life may be like a box of chocolates, but purchasing life insurance is more like ordering coffee at Starbucks. There are many options to consider before making a decision. It can be extremely confusing. CEO Faisa Stafford of Life Happens says that this can be true as well of insurance.

Among the biggest reasons people give for having life insurance is confusion over the type and amount of life insurance they need, a survey by Life Happens and LIMRA has found. The pandemic, however, has been a wake-up call for many Americans, with one in three people (31%) saying they are more likely to buy a policy as a result of the pandemic.

If you are considering purchasing life insurance, these ten pointers will help.

Tip No. 1: Assess Your Current Financial Situation

You must also understand your financial health before you can determine how much life insurance coverage you require and how much. Stafford advises this.

Consider and consider what you own in place to provide financial security to support your dependents if they rely on you financially. Additionally, consider an emergency fund, retirement savings and life insurance coverage through work. Perhaps you are not as prepared as you anticipated to be for the unexpected.

Stafford recommends working with a certificated financial planner to go over what needs to be protected with life insurance a landlord's mortgage, children who will be supported, a company to remain, or a legacy you want to leave. Your work area might offer access to a financial planner as one of your benefits. Or you can look for a fee-only financial planner through the National Association of Personal Financial Advisors.

Tip No. 2: Know How Much Coverage You Need

Many folks underestimate just how much money long-term insurance requires, according to Adam Winslow, chief executive of Aviva UK & Ireland General Insurance, part of the international savings, retirement, and insurance business of Aviva. They typically consider how much debt they need to pay during their lifetime. However, they should consider how much more would be required to assist a spouse or partner cover expenses, pay for college tuition, or provide for other long-term needs, he says.

When considering insurance programs, one general rule is to have a policy with a death benefit equal to at least ten times your annual salary. But your own circumstances and financial goals may dictate that you have more or less than this amount. A financial planner can help you come up with a more accurate figure.

Tip No. 3: Choose a Life Insurance Policy Type

Life insurance buyers often opt between term and whole life insurance. A term policy typically offers you coverage for a predetermined period of time, such as 10, 15, 20, or 30 years. It's a relatively inexpensive way to cover yourself until you hit a certain financial milestone, such as paying off your home mortgage or helping put your kids through college.

Searching for other types of permanent life insurance in addition to whole life? A permanent life insurance policy provides long-term coverage, which makes it more expensive than term life insurance. It is also more expensive because it builds cash value. This money can be used for anything you would like to cover emergencies, supplement retirement income, pay for long-term care expenses.

Tip No. 4: Understand What Affects Your Life Insurance Rate

The major factors life insurance companies consider when determining the premium you pay are health and age. The older you purchase life insurance coverage, the cheaper it will be, says Winslow. That's why being younger will help you save money on your coverage.

The premiums you pay for life insurance also have a considerable effect on your expense. The size of the death benefit you select and the type of plan also affect how much you pay.

If you need term life insurance now but want to have permanent life insurance coverage later, most term life policies include the option to convert to a permanent life policy. You could lock in a low premium by paying for term life insurance now, and then convert it to a permanent policy if your income rises in the future.

Tip No. 5: Compare Life Insurance Companies for the Best Rate

Many insurance companies offer online quotes to enable you to conveniently compare life insurance rates. You need to compare rates from different companies to get the best value. You may also consider using a traditional insurance agent who is licensed with many insurance companies to help you find the optimal policy for the best price.

Tip No. 6: Don’t Just Focus on Premium

It's something you'll need to consider when determing if you want a life insurance policy. After all, your premium will be meaningless if it's out of your budget. But you shouldn't just base your decision on cost.

IUL policies made with guaranteed advantages tend to be more expensive than others. If it is an indexed universal life insurance policy you're evaluating, pay special notice to guaranteed vs. non-guaranteed aspects of the illustrated policy.

Look for a company that has strong financial ratings from independent rating agencies such as A.M. Best, Moody s and Standard & Poor s. Insurance providers offer ratings on their websites. You can also ask your life insurance agent to supply companies ratings.

Tip No. 7: Prepare to Answer Lots of Questions When Applying

Your insurance plan premium will be primarily determined by a quote provided by your insurance company. To obtain a plan, you'll have to fill out a lengthy application. You'll be asked a number of questions relating to your age, weight, medical history and mental health, family medical history and tobacco use.

The insurer will ask about your driving history and whether you have a dangerous job or hobbies that make you more of a danger to insure. This information is used to establish your true insurance rate.

Tip No. 8: Be Truthful on the Application

Be sure to include and include all the necessary details on your life insurance premium application to avoid hiding any relevant information.

For instance, the insurance agency can get information about you by accessing your medical records, drug history, motor vehicle report, and public records. Alternatively, you may be required to take a physical examination, which includes blood and urine tests.

Tip No. 9: The Process Doesn’t Have to Be Painful

It is likely that you need not be poked and prodded during the application process. Stafford notes more and more insurance providers are experiencing a shift to choices for no-exam life insurance. Instead, they rely on third-party resources for information provided and data modeling to ascertain their risk class.

Keep in mind that life insurance policies come in many types:

• Accelerated underwriting policy.

This type of policy frequently involves a lengthy application and the insurance company will request additional information from third-party sources, such as your prescription drug history. The premiums are usually competitive with a fully medically underwritten policy with an exam.

• Simplified issue.

These sorts of policies only ask questions and require few, if any, third-party sources of information. Because there's little about you, these policies typically have higher costs.

• Guaranteed issue life insurance. 

This type of insurance typically asks no health questions, and is the most expensive means for purchasing a no-exam policy. You cannot be denied coverage.

Tip No. 10: Lock in Temporary Coverage

If you own an insurance policy, then you can usually lock in temporary protection by attaching a check with your first premium payment to your application. There are a number of advantages you will acquire as you go through the underwriting process. Ask your life insurance agent about this option.