May 13th, 2020 | Updated on July 28th, 2021
Once you decide you want life insurance, be ready to spend many days browsing through companies to find the one that suits your interests.
Buying life insurance is more overwhelming than looking for any other type of insurance because it affects your loved ones. The market provides a wide range of policies, programs, and providers.
If this is the first time you hear the term life insurance, it designates a contract between you and the provider.
It’s a form of financial protection you acquire for your family in case of death. During the policy, you’ll pay determined amounts, and in case of death, the provider will pay your family or designed beneficiary a specified sum.
Because you’re new to the subject, it may be tricky to figure out what it implies. You must know that it provides financial support for your loved ones when you’ll no longer be there to help them.
Some companies also allow you to use the money for some big purchases during your lifetime if you decide to give it another purpose.
When you shop around for life insurance, here are the questions you need to ask.
1. How Much Life Insurance Do I Need?
There’s no general answer to the above question. The sum you want your family to get and how much coverage you afford are the main factors that determine your insurance.
Your income is the one that influences the amount of insurance you get.
Other factors that can influence it are the number of dependants, your assets’ value, and your liabilities.
You probably have a retirement fund or house mortgage, and the insurance provider will consider them to identify the right policy for you.
Most companies have online forms you can use to figure out the extent of the plan.
2. Is the Monthly Premium Fix?
Before contacting an insurance company, check your income and try to understand if you have a fixed budget.
If you do, write down the monthly expenses and establish how much you can spare for the premium. It’s best to opt for a level or fixed premium because it provides coverage for a determined period (let’s say 20 or 30 years), during which the rate is locked.
You can also choose a whole life plan that locks the monthly rate at a certain sum and provides coverage for your entire life. With both options, it’s essential to pay the price monthly to keep them going.
Ask the provider what happens when you fail to pay the premium. It’s common for people to deal with financial challenges and only because you have a steady income now, it doesn’t mean you’re safe from downs.
Check with the customer representative the alternatives available when you cannot pay monthly premiums. Work only with a company that has solutions for this scenario.
3. Should I Get Extra Life Insurance If I Already Get It Through Work?
It’s great that your employer offers this benefit. Most time, group policies facilitate affordable and medical exam-free life insurance.
The drawback is that the premium will equal to one or maximum two years of salary, or a pre-established amount, and it may not be enough to help your family in case of passing.
Also, when you change your job, you cannot take life insurance with you, and you lose money. And the older you get, the more costly the policy is because you experience health issues.
So, it’s a great idea to get personal coverage to supplement the one your employer provides.
4. How Much Will It Cost Me?
The cost of life insurance varies from a provider to another. From their perspective is all about risk, so the higher the risk of dying, the more you’ll pay.
If you are young and healthy, it’s affordable to purchase life insurance because the company doesn’t view you as a liability.
Insurance providers consider your age, use of substances, medical history, hazardous pastime (if you like extreme sports expect your premium to skyrocket), and similar aspects to determine your level of risk.
When diagnosed with medical conditions like heart disease, cancer or dementia, the insurer can deny your application.
Most of the insurers ask all applicants to have a medical exam before responding to their request. If you don’t know what insurer to pick, check this list from Lifeant on the best life insurance companies.
Get in touch with their representatives and ask them what factors influence the cost of the policy.
The number of years you need the coverage in place and its amount also influence the cost of the premium. The price goes up if you add customized provisions and riders to the policy.
5. What Does It Cover?
Different premiums offer specific coverage and financial benefits. Don’t sign on the dotted lines before you understand what the policy covers.
What Types Of Insurance Can I Pick From?
The type of insurance determines what you get, so you should ask the representative to present to you the array of services they provide.
There are two types of life insurance (term and permanent) all companies provide.
Term life insurance guarantees the premium for a determined period, and it’s more affordable than the permanent one. You decide the period you prefer, you can pick from 10, 20 or 30 years premiums.
Most parents choose the 10 or 20-years policy because they want to make sure they can pay for their children’s college education if one of them is passing.
Permanent life insurance covers your entire life, as long as you pay for it monthly.
You can even buy a permanent policy for your children, and it will stick throughout their life even if they develop medical conditions that threaten their life, at a certain point.
Most people find whole life policies appealing because they can build cash value.
But if you don’t see them advantageous for your need, you can have a universal life premium that is more flexible.
You can adjust the monthly rates, death benefits, and accumulation portion.
Do you have any other questions you would like to ask your insurance company?