How to Purchase Life Insurance
Life insurance plays a crucial role in securing the financial future of a family. While the decision to buy a policy is an easy one, purchasing one can be vexing due to the overwhelming number of choices available. With hundreds of life insurance companies offering thousands of different products, the task of selecting the right plan for you can be a daunting one. A Benefits Consultant at Towne can help you and your family navigate these important conversations.
As with any decision that involves a lot of choices, the best course is to narrow them down as best as you can, using some parameters that can eliminate the ones that are least suitable for your needs.
Determine Your Life Insurance Needs
No one likes to buy too much life insurance, but buying too little can be devastating for your family. The best way to determine your need is to calculate how much of your income needs to be replaced until some other form of income can be generated by your family. Also, paying off debts and prefunding future goals, such as college education, will reduce your family’s financial burden.
Study Life Insurance Plans
Life insurance comes in several forms, and it is important to know how each of them works to determine the best plan for you:
Term Life Insurance: You are essentially buying a death benefit for a specific period of time. You pay for the cost of insurance until the policy expires in 10, 15, 20, or 30 years. It’s an inexpensive way to buy insurance if you only have a temporary need. The problem is that if there is a possibility that your family’s need for life insurance should continue beyond the expiration of the term policy, it could become very expensive to buy continuing coverage if you are still able to qualify for it.
Cash Value Life Insurance: If you think that you may have a permanent need for life insurance, a cash value plan can provide guaranteed protection at a fixed premium rate for as long as you pay the premium. These policies include a cash value component that allows you to build equity on a tax-favored basis, which can be used for other financial needs or to pay down the cost of the policy. In many plans, the cash value growth is sufficient to ultimately cover the premium costs.
What to Expect When Buying Life Insurance
Life insurance is a complicated product involving a lot of moving parts and it is generally priced based on your age, health, and medical history. So, the life insurer will need to know a lot about you before issuing you a policy. In most cases, they will require copies of your medical history which is provided by your physician. For larger policy amounts, you might need to take a physical exam. Additionally, they may require financial information and evidence of your good character. This is all the more reason to work with an experienced insurance broker who can help you navigate the process.
The life insurance purchase is never a simple one; however, by working with a Towne Benefits Consultant and discovering your needs for protection, you will be in a much better position to make the right choice.