When buying life insurance, you may feel a little unsure about where to start. The process can seem complicated and even a little intimidating, but if you ask the right questions and research your options, you’ll be armed with the information you need to make a smart decision.
As you shop for life insurance, start by asking the five questions below.
Q: Why do I need life insurance?
This answer may seem obvious as most of us want our loved ones to have added financial security in case something should happen. Look at your personal situation and understand why life insurance is important to your family. Ask yourself, who depends on you now and in the future? It’s helpful to look at your marital status, the age of your children, or if you have grandchildren. Are you a care-giver to a parent? What is your job status or retirement path? Also, look how purchasing life insurance fits in with your financial goals and needs. Determining these factors will help you prepare for the next question.
Q: How much life insurance coverage do I need – and how much can I afford?
The amount of coverage you need and the amount you can afford go hand-in-hand. Determining how much coverage to get can be one of the most difficult questions to answer when it comes to purchasing life insurance. For some, buying a $10,000 policy may be enough to help cover final expenses. For others, $100,000 in coverage may be the amount needed to help their family help cover the mortgage or some bills left behind. Your age, financial situation and current life stage will all factor into how much protection you may want to purchase.
Here are a few basic ideas to help you determine the coverage you may need:
Add up the immediate and ongoing monthly expenses your family may incur after your death
Look at your current and future savings, investments or other funds that may be available to your family, as well as debts that could cause hardship to loved ones
Use an online life insurance calculator to assess your future needs
Once you determine the amount of coverage you may need, you can, in most cases, easily go online to get an instant, free quote to see how much a policy costs each month. Once you have a good idea of insurance rates available, you can reassess your budget and increase or decrease coverage.
Q: What type of coverage is best for me?
Although there are several different types of life insurance, the two main product categories are defined as term and whole life insurance:
Term life insurance is coverage for a specific period of time — which can last from a few years or until a certain age. This type of life insurance offers premiums that increase at regular intervals until coverage ends. Term life insurance can be a good way to get maximum coverage and help meet your changing needs.
Whole life insurance, also known as permanent life insurance, is designed to meet long term needs. Whole life policies offer protection for life. Premiums are usually higher than term insurance; however, they do not typically increase during the life of the policy.
Also, premiums for whole life insurance are based on your age at issue. So your rate won’t go up due to changes in your age or health. Additionally, whole life insurance can build cash value over time that you can borrow against as needed.†
Q: Am I willing to take a medical exam to obtain life insurance?
The application process to obtain life insurance coverage varies based on the product and company. Most high coverage policies require you to undergo a medical exam and blood work. Fortunately, there are life insurance companies who also offer coverage that requires no medical exam or blood work. You may have to answer some health questions and provide information, but do not have to visit a doctor. Many older adults choose these types of policies because the coverage is ample for their current needs and, in many cases, it’s easy to apply by mail or even online. Whichever type of coverage you choose be sure you understand the requirements before you apply.
Q: How do I choose the best life insurance company?
An insurance policy is only as good as the company that backs it. You want to be sure the company you are relying on is financially strong and will be around years from now to pay the full value of your coverage. It’s a good idea to research a company’s history in the market, read industry and customer reviews, and even look at life insurance financial strength ratings. Standard & Poor, Moody’s Investor Services and A.M. Best and Fitch are among the nation’s top independent agencies that rate insurance companies. Looking at these elements will help show you which company may be the right choice for you.
When buying any type of life insurance, it’s always important to research, ask yourself the right questions, explore your options and be confident in the product and company you select.
This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial, or accounting advice. Please consult your own professional for advice specific to your circumstances.
† Loans accrue interest and reduce the total cash value and total death benefit by the amount of the outstanding loan and accrued loan interest.