Reading a menu board at a busy quick-service restaurant can cause confusion. Double this, add onto that, and you have at least one customer holding up the line.
Confusion is the last thing you want to feel when it comes to buying a life insurance policy.
According to a survey released by LMRA and Life Happens, confusion over purchasing the right life insurance policy is one of the reasons why many people decide to forgo life insurance.
If purchasing a life insurance policy makes a Starbucks menu board seem a simple read, then follow one or more of the following tips to rid yourself of confusion.
Tip #1: Understand Your Financial Needs
The first thing to do involves conducting a thorough assessment of your financial needs. What exactly do you want the proceeds of a life insurance policy to cover? You have to consider the loved ones that will need financial support, as well as major expenses such as college tuition and a major home improvement project. Working with a certified financial advisor can help you sort through your financial needs.
Tip #2: Determine How Much Coverage to Buy
Adam Winslow, who is the CEO of Life Insurance at AIG Life & Retirement, says most people underestimate how much life insurance coverage to purchase. Instead of just looking at the major expenses, you also have to consider the monthly bills and daily expenses that your loved ones must pay. A general personal finance principle is to buy a life insurance policy that provides a death benefit that is 10 times your current salary.
Tip #3: Understand Term and Permanent Life Insurance Policies
Buying a term life insurance policy means you purchase coverage over a specified period. For example, a 20-year term life insurance policy provides insurance coverage for 20 years. Choosing the term life insurance option is a sound financial choice for someone who wants to ensure full coverage for a specific financial goal like paying off a home mortgage. Permanent life insurance policies provide policyholders lifelong coverage, which makes it more expensive than a term life insurance policy.
Tip #4: Know the Factors That Determine Life Insurance Rates
Age and health are the two factors that influence life insurance rates. The younger you are, the lower you can expect to pay in monthly premiums. Younger people also tend to be healthier, which gives them another financial incentive to purchase life insurance. You also have to consider the amount of the death benefit and the type of policy you want to purchase.
Tip #5: Price Shop for the Best Rate
Shopping for the best life insurance rate has never been easier because of price comparison websites. Just a couple of clicks and inputting a few financial numbers gives you a list of insurers and their prices for life insurance policies. You should also consider working with an independent agent who has developed a professional relationship with several insurance companies.
Tip #6: Think Beyond the Premium
Although the cost of the monthly premium should be the prime concern when buying life insurance, you cannot overlook other factors. For example, if you want to purchase a cash value life insurance policy, the costs associated with managing the policy can negate any discounts that you receive on the monthly premium. Buying an indexed universal life insurance policy requires you to consider the guaranteed and non-guaranteed parts of the policy.
Finally, make sure you submit a life insurance application that includes detailed information about your health and financial objectives. Remember that insurance companies have access to third-party resources to confirm the information you submit in your application.