Sometimes, people shop around and seek the best value for their money. At other times, they may purchase the first product that can solve their problem or satisfy their desire. With long-term products like consumer durables and financial products, buyer’s remorse may be enduring. Life insurance is no exception. Making an informed purchase is critical, particularly as life insurance plans offer a variety of benefits and provisions. Fortunately, a few guidelines on how to buy life insurance will help.
1) Know why you need it
People need life insurance for many different reasons. Your purpose for that type of insurance would influence whether you choose permanent or term insurance in the first instance. You would have to prioritise your purchasing reasons. You would have to decide if you are using life insurance for income protection primarily or if you want a comprehensive package. Life insurance plans may include additional features like critical illness coverage and disability income as optional supplementary benefits. To enable forced savings, a cash value plan would be appropriate.
2) Estimate how much coverage you need
It is just as dangerous to buy too little insurance as it is to buy too much. Both would lead to wastage of money in the long run. If you are underinsured, then you may have to purchase more insurance at higher premiums later. Properly estimating your life coverage need enables you to extract maximum value from your acquisition. Your coverage should be based on future earnings, current living expenses, immediate cash needs for your beneficiaries, existing assets and an income replacement value. A good life insurance calculator would itemise needs under each category and provide a representative coverage estimate.
3) Select the plan There are several plans to select from both term and permanent insurance. Term insurance has different coverage periods and stipulations. Permanent life insurance consists of whole life and universal life plans. Some whole life plans are dividend paying and offer different dividend-payment options. Universal life plans offer several additional benefits and may be fixed or variable.
In choosing a plan you have to shop around. Insurers have different plan structures for the same plan type. Comparison shopping also helps you select the best package and strongest company. Your selection should not be based on the lowest premium but on the highest value for the premium offered. The insurer should also have a good A.M Best rating, which would give an idea about its strength and investment capabilities.
You can opt to consult a life insurance agent, broker or purchase life insurance online. In any event, you need to ensure that your interests are being served. Your agent or broker should be trustworthy and demonstrate that they are not seeking to make the highest profit for themselves. You can determine this by looking at whether they’re making a proposal based on needs, whether they can justify their decisions and if they gave you an insight into your options.
In order to buy life insurance, you should be prepared to do minor research. If that is too much for you, then you would have to accept the package you get. Issuing life insurance is a methodical process for insurers. Acquiring it should be a methodical process for buyers as well. Rushed purchases leave you at the mercy of agents, brokers or your own ignorance.