How should I shop and buy life insurance?
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Asked June 17, 2013
The first step in getting life insurance is to decide what type of policy you need to have. After that, you should look at value of what you are trying to protect, and only then can you actually begin to shop for life insurance policies. The process is not as difficult as it may sound, and you could easily do the research and basic applications from home on a rainy afternoon.
There are 3 primary types of life insurance: Term life, permanent life, and final expense insurance. Of these, Term life is the only unique type, as it is purchased to cover you for a predefined length of time, such as 5, 10, or 20 year terms. Final expense insurance is a form of permanent insurance, but it is generally for a moderately low amount of coverage, and the benefits of the policy pay out to a funeral director rather than to a beneficiary of your choice.
Permanent life insurance can also be broken down into several sub-types. Variable life, universal life, and whole life are three of the most common flavors of permanent life insurance, and each one has advantages and disadvantages over the others. Defining these types of insurance would not be suited to this answer, but you can find information on the types of life insurance on this website.
Once you have chosen a type of policy, you will need to choose a coverage amount. For term life, the usual goal is to cover a certain life event, such as paying off the mortgage or providing college tuition for your children. Permanent life insurance is typically used as a general coverage for all your family's needs, and most experts will tell you to calculate the monthly costs of maintaining the home, multiply that amount by 12, add 10%, and then multiply by 5 or even 10. This account for your annual costs plus a hefty 10% possible inflation rate, and then multiplies that amount by the number of years you are trying to plan for. This is still a ballpark figure, and each applicant should consider it carefully. It would be better to have too large of an insurance policy than to leave your loved ones hanging financially after you pass away.
Similarly, if you are not the primary breadwinner in the family, your loss would still entail great costs and inconveniences which should be considered. Think of the cost of childcare if you are a stay at home parent, and the need for someone to handle the daily routines such as cooking and cleaning, making pickups and deliveries, doing the laundry, etc. Even if you have never worked a day in your life at a job, the labor you put into your family has a monetary value that should be insured.
Once you have settled on a type of policy and have a rough idea of how much you need to be insured for, you can begin researching life insurance companies. Start by talking with friends and neighbors, and then come back to this website and use the free life insurance quote tool. You will receive an estimated cost of the policy you want, along with comparison quotes from other leading insurers. Remember that the quote is only an estimate, and that you will have to take a medical exam before the premiums can be finalized.
Before you buy a life insurance policy, check with the A.M. Best financial ratings company to find out how well your choice of insurer is doing. The ratings are provided in a simple letter grade that identifies the financial strength of the company today, along with a second letter grade that establishes how the company is expected to perform in the long term. Because life insurance policies may remain in effect for many years, it is important to choose a strong company that is stable and expected to be around at least as long as you are.
Answered June 17, 2013 by Anonymous