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How to Buy the Right Life Insurance Policy for Your Needs?

Oct 27, 2021

Life Insurance

How to Buy the Right Life Insurance Policy for Your Needs?
Shopping for life insurance can be overwhelming for some people because of the complex details involved. Every policyholder has their own personal reason for investing in a life insurance policy. Many people lack access to life insurance because they don't understand it. Here are a few steps that you need to take to ensure a smoother experience while buying a life insurance policy.

1. Decide whether you need life insurance

Certain individuals, such as those who are wealthy, might not need life insurance. You may also not need it if you have no debt and no one depends on you for income. Nonetheless, if you are raising a family, life insurance can serve as an important financial safety net in case you become ill and are unable to work. It really comes down to caring about others and how much you want to invest in their survival and well-being after your demise.

2. Calculate the amount of coverage required

In order to estimate the amount of life insurance coverage you need, you must answer these two critical questions:
  1. What financial resources will be available to survivors after your death? - You can simplify the answer by dividing resources into three categories: 1) Social Security and retirement benefits, 2) a group life insurance policy, and 3) other assets.
  2. What financial needs will your survivors have after your death? This answer can also be split into three parts: 1) final expenses, 2) debts, and 3) income needs.
Figuring out Social Security benefits is different for families than a policyholder with a wife and no children. The spouse must be at least 60 before collecting Social Security benefits, whereas a family with children can start receiving benefits right after the policyholder's death.

3. Consider other objectives as well

Various types of life insurance plans exist to fit different needs. Term life insurance coverage is for specific time periods, while whole life coverage spans the policyholder's lifetime and beyond. Whole life insurance costs more and pays out more, as it can be used as a growing investment or even a savings account. Term coverage is cheaper and can be canceled at any time, which works for individuals with tight budgets and minimal assets.

4. Decide which plan best suits your needs

Take some time to weigh the pros and cons of both whole and term life insurance. Decide which plan fits your situation. If you are raising a family with multiple dependents, whole life insurance will definitely provide more financial stability. However, since it costs more, you must decide if you can afford it. Some families cannot afford to avoid it, especially if they have a large estate with valuable assets.

5. Consider adding riders to your policy

Riders are extensions or add-ons to general policies that usually cost extra. Riders exist to help insurance customers customize their plans. Talk with your insurance agent about your financial situation to get ideas on different options for riders. Be aware that different individuals have separate insurance coverage needs, while different insurance companies have their own coverage offerings and pricing. Riders are useful for making grey areas of insurance more specific to ensure coverage.

6. Compare quotes

Figure out the plan you need, then look for an insurer that best fits your needs. Think about what you are able to pay for a monthly premium and how much coverage you want to provide to beneficiaries. Ask yourself what type of payouts will be necessary in the event you are unable to work. Be aware that age and gender affect premiums, as males and older individuals tend to pay higher rates. Other important considerations when selecting a life insurance company involve due diligence in ensuring the firm is reputable. The company should be licensed in your state and easy to research online. Be sure to read online reviews about the company to get a feel for how well they treat customers and beneficiaries.

7. Decide how you will pay your premiums

Some life insurance companies give customers the option to pay their premiums monthly or annually. The better deal is usually to pay annually than in smaller installments that include added fees. Many families cannot afford to make large annual payments due to the rising cost of living, which makes it difficult to save money. If you can only pay monthly, ask your insurer about discounts or options for cutting costs.

8. Inform the beneficiaries

Once your policy is finalized, let the beneficiaries know who the insurer is and how to contact them for a hard copy of the policy. Most beneficiaries are aware of the life insurance plans with which they are associated. Still, sometimes a person can be surprised to learn they are a beneficiary when the policyholder dies. Be sure to store your life insurance policy documents in a safe place where they can be accessed by the beneficiaries. Planning a life insurance policy for your family can be complex. There are many questions to ask and details to consider before you make your final decision on a policy. To simplify the process, meet with a life insurance expert who can answer your questions. Contact our experts at Fuller Insurance Agency to learn more about what could be the most appropriate life insurance plan for you and your loved ones.
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