Ten Tips Before You Buy Life Insurance

Life insurance is an important product to have as you develop a family or begin to age. Life insurance is now cheaper than ever before, so it may be the time to start looking for a policy. Before you sign on the dotted line, be sure to check out these tips for buying life insurance.

1. Determine how much coverage you need
Think about how much life insurance you really need. It’s always better to have more coverage if you can afford it, but to get the best deal on a reasonable amount of insurance, think about your obligations and what will be gone without you. If you are the main breadwinner in the family, financial advisor Suze Orman always suggests you get a life insurance policy that covers your annual salary for at least twenty years. If you have children that will be going to college, a house, other obligations, etc. you’ll want to increase the amount of your life insurance policy.


2. Make positive changes in your health before buying
Do you smoke? You already know it’s not the greatest thing for your health, but it will drastically increase your life insurance policy premiums. If you’ve been meaning to lose weight, now is a great time to do so, because it will place you in a lower-risk group. Anything that will make you healthier in the eyes of your life insurance company will lower your premiums when you go to buy a policy.

3. Term life vs. whole life
A term life policy is very simple. It lasts for a certain period of time, and if you die, your family gets the payout from the policy. Whole life involves investments that you can “cash out” or reap the benefits of, but a life insurance policy should never be considered an investment vehicle by itself. Whole life insurance costs more than term life insurance and the investments and details involved in the whole life insurance policy can be difficult to understand. Usually, the best fit for most people is term life insurance, but if you’re not sure which one to get, you may want to schedule an appointment with a financial advisor or life insurance company representative.

4. Comparison shop
This one is simple. You shop around before you buy a car, don’t you? The same should apply when shopping for a life insurance policy. Your employer may offer a very good (or very poor, for that matter) life insurance plan, and there may be a better plan out there than the one sold by your local insurance agent. Life insurance quotes of all types are now available on the internet, so do your research and find a policy that is the best fit for you at the best price.

5. Read the fine print
There may be hidden fees, expenses, premium rate hikes, lockouts, etc. The insurance company is required to disclose them, but they don’t have to shout it out loud in their advertising while they’re telling you how great their policies are. So be sure to read and re-read the fine print and be direct in asking about anything that is unclear. It’s better to find out the insurance policy is not for you before you sign on the dotted line.

6. Keep up with your policy; make sure it still fits your needs and budget
There’s nothing wrong with getting more life insurance if you buy a new, more expensive house or your spouse is in a position where they cannot find regular employment. If you have paid off your house, don’t have the money in your budget for the premiums, or simply have what you think to be an excessive amount of insurance, it is okay to lower the amount some. Life insurance is not “set it and forget it”.

7. Make sure your insurance company is a safe place to put your loved ones’ futures
The payment of your policy is based solely on the ability of your insurance company to pay, so you want to be sure the company is around to pay your loved ones the insurance you paid for during your life. Check the credit ratings of the companies you are thinking about insuring yourself through, and make sure they have a high credit rating, with the ratings acting like school grading systems and multiple letters being better than single letters (AAA is reserved for the United States government, etc.). Stick to insurance companies that have a credit rating of “A” or better and are well known.

8. Do not miss payments
Miss one payment and your life insurance policy can be canceled. An insurance company loses money when it has to pay out, and it makes money when they get premiums and never pay out. By missing a payment or two, you are making sure that your life insurance company is getting money for nothing.

9. Lock in your rates at a younger age
Buy a life insurance policy when you are younger and it will cost you less. If you get a policy that has a fixed premium, then you have just insulated yourself against life insurance premiums that will only get higher as you get older and become, in the eyes of the insurance company, less healthy.

10. Ask for help
If you’re about to be giving money every month to a company, they should be able to talk with you about your needs and goals when buying life insurance and help you to evaluate your own situation to find the right product. If the agent or company is unwilling to help you and explain anything you don’t understand, you should consider whether these people are just trying to take advantage of something you don’t know and if you really want to buy a life insurance policy with them.
Take these ten tips with you before you buy a life insurance policy and you will save yourself and your loved ones lots of frustration in the future.