The Basics Of Buying Life Insurance

By: Leslie Adams

Getting Started

As you begin to prepare to purchase a life insurance policy, it is essential to evaluate your ongoing and potential future financial necessities and review the available policies accordingly. First and foremost, make sure you are fully informed on the basics of life insurance.

Why do I need life insurance?

If another individual financially depends on you, the likelihood that you need life insurance is very high. Life insurance provides cash to your family members in the event of your death. The funds your beneficiary will receive (the death benefit) can obviously be a valuable financial resource. It can help to cover everyday living expenses, pay the mortgage, loans, or tuition, and will help to ensure that your family is not burdened with the heavy load of debt. Obtaining a life insurance policy could means your spouse or dependent children may not be forced to sell assets to pay bills. Any money that beneficiaries receive does not carry a federal income tax either.

How much life insurance do I need?

Everyone's life insurance needs depends on their personal financial situation. It is highly recommended to contact a life insurance agent or financial advisor to aid in determining what the appropriate level of protection is you and your family based on your income and financial responsibilities, both present and future. Online calculators can prove to be helpful, however consulting an insurance professional to review particular financial needs will give you a more accurate description of your life insurance options and needs.

Typically, determining how much life insurance you need requires deducting the total income that would be subtracted from the family's total income and financial needs in the event of your death. It is crucial to keep ongoing expenses in mind, such as day care, tuition, mortgage, and/or retirement as well as immediate expenses. Immediate expenses could include funeral services or funds needed for relocation.

Some experts in the field suggest that a life insurance policy should pay a benefit that equals seven to ten times your yearly income. However, your personal need may be higher or lower depending on your particular situation.

How to Purchase: Choosing a Company or Agent

Life insurance can be purchased at a multitude of locations: insurance agencies, brokerage firms, banks, or directly from a life insurance company by mail, phone, or the Internet. Generally insurance companies have webs sites detailing their various products and services. These sites will most likely be able to help direct you to an agent in your area.

How do I choose a company?

Begin by contacting your state insurance department for a full listing of insurance companies licensed in your state. It is also a good idea to ask friends and relatives for some recommendations based on their own experiences. Make sure to consult an insurance agent or broker and do some research on your own, either on the Internet or at a public library.

It is very important to verify an insurance company's financial strength. Although life insurer companies are generally in excellent financial standing since they are required by law to keep reserve funds to guarantee that they can meet financial obligations to their policyholders, it is still a good idea to do everything you can to ensure this.

Checking a company's financial condition is relatively simply. Assess their rating by contacting a rating agency. This information is available online or in business publications at the local public library.

How do I choose an agent?

Collect a selection of names of several agents through research and/or personal recommendations. You can find out if a particular agent is licensed in your state by consulting your state's insurance department. Insurance agents who offer variable products have to be registered with the Financial Industry Regulatory Authority (FINRA) and possess an additional state license as well.

Do not hesitate to express concerns or to ask what company/companies the agent currently or previously represents or to see/check professional accreditations.

Life Insurance
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