Tips for First Time Life Insurance Buyers
There's no question that buying life insurance for the first time, like any other new experience, can be more than a bit daunting. Below are important tips that we hope will make the process smoother.
1. Understand what Life Insurance provides.
Life insurance is designed to provide your family with financial security in the event of the death of a spouse or parent. These policies can help pay off mortgages, provide college tuition, help to fund retirement, donate funds to charities, and help in estate planning. In short, if others depend on your income for support, you should strongly consider life insurance.
The unfortunate truth is that the best time to purchase a policy is when you are young--when most of us don't even have retirement on our radar! . The reason: The younger you are, the less expensive life insurance will be. However, life insurance can be purchased at any age--your Wheat State Insurance Group agent can help you learn more about coverage options.
2. Determine the amount of coverage you need.
The amount of money your family or heirs will receive after your death is called a death benefit. There are a variety of ways to determine the proper amount of life insurance: you'll find a variety of online calculator or you can get a ballpark figure by multiplying your annual income by 8.
A more detailed method is to add up the monthly expenses your family will incur after your death. Remember to include the one-time expenses at death and the ongoing expenses, such as a mortgage or school bills. Take the ongoing expenses and divide by .07. That indicates you'll want a lump sum of money earning approximately 7% each year to pay those ongoing expenses. Add to that amount any money you'll need to cover one-time expenses, and you'll have a rough estimate of the amount of life insurance you need.
As useful as calculators and rough estimates are, there are some things they don't do:
They can't provide you with any final answers. Calculators only allow you to perform "hypotheticals," recalculating and generating new results as you make and input new assumptions. Let your Wheat State Insurance Group agent walk you through the process and get the answers you need to make the best decision.
3. Find the right type of policy.
Once you figure out how much coverage you'll need, you can think about the best kind of policy to meet your needs.
You have two main options: term life, for a more affordable premium, or permanent life, for more comprehensive coverage that can add cash value. But you have a lot of options to explore...we're happy to answer any questions you may have, no strings attached!
4. Learn the lingo.
Life insurance--like all insurance policies--include a lot of different terms and descriptors that you may not be very familiar with. If you are researching on your own, visit our Insurance Defined
page to look up the terms that you need clarified.
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