The COVID-19 pandemic has made millions of people decide to look into life insurance for the first time. Research suggests that more people than ever are buying life insurance policies. Buying life insurance can be a confusing process. There are many options for providers, types of coverage, coverage limits, and monthly premium. For many people, it’s hard to know where to start and which options are right for them.
So how do you know what type of coverage you need? Which companies are the best? And what you can really afford? Put together by a life insurance agency in Abilene, TX, here are some tips to help you get started.
5 Tips for Buying Life Insurance
If you are looking into life insurance for the first time, here are some tips that can help you find the right coverage for your goals and budget.
1. Assess Your Current Finances
The first step in buying life insurance is assessing your current finances. This is important for budgetary reasons, but also because you need an idea of what sort of expenses you may need to have covered by your life insurance policy. Do you have a mortgage? Do you have dependents that rely on you financially? These are important considerations. Think about who relies on you and what would happen to them if you can no longer financially support them.
2. Determine How Much Coverage You Need
Most people underestimate how much coverage they need. Often, people estimate the amount needed to pay off debt or cover a mortgage, but they don’t factor in day-to-day expenses like utilities, college tuition, or the costs of supporting children. It is important to factor in all of these expenses and make sure that your coverage is adequate. Some experts recommend death benefit payments be equal to 10 times your annual salary. Ultimately, how much coverage you need depends on your individual finances, expenses, lifestyle, and family obligations.
3. Understand the Different Types of Coverage
Most often, you will see advertisements for “term life” or “whole life” insurance policies. The differences between these two are:
- Term Life – Offers coverage for a specific amount of time, and has an end point.
- Whole Life – Offers coverage for funeral expenses, allows inheritance for beneficiaries, and builds cash value. Whole life insurance has no end point
Term life is a good choice for people who want coverage for a specific period of time, such as while paying off a mortgage. Whole life ultimately offers more coverage because it never expires and it builds cash value. Whole life policies are more expensive, however. So it is important to choose the type of life insurance based on your goals.
4. Understand What Factors Affect Life Insurance Rates
When you buy life insurance, your rate is based on two important factors – your age and your health. The younger and healthier you are, the less expensive coverage tends to be. As you get older, or if you develop a chronic medical condition, you may find your rates are much higher.
Of course, the type of coverage you choose and the value of that coverage also factors into how much your premiums are. Look for policies that offer fixed-rates. You can sometimes find policies that begin as term but can be switched to whole life later.
5. Shop Around to See the Best Rates
Many insurance companies offer free quotes online, but that doesn’t mean their promise of the best rate is the best rate for you. Shop around to find the best rates based on what you need. Many people find it helpful to work with an independent insurance agent who can easily tell what current rates are, and what discounts or other options might be available.
An independent agent can help you understand all of your options and the best way to get the coverage you need at a price you can afford.