What First-Time Life Insurance Buyers Need To Do
Shopping for life insurance for the first time can leave you feeling confused about the range of possible options. Before you select a policy, it's a good idea to do a handful of things. If you plan to schedule a life insurance consultation, do these three things to prepare.
Determine Your Needs
Life insurance is a hedge against the unpredictability of life, but the possible risks each person faces are going to be different. You should think about the specific reasons you wish to acquire insurance. A young family with one parent as the earner, for example, needs to consider how to replace lost income if that earner passes suddenly. The policy has to cover everything that the parent was going to pay for, including everything from daily living expenses to education costs. By establishing this as the purpose of the policy, the family can determine how much coverage they'll need.
Term vs. Permanent
An insurance policy either has a term or is permanent. When a policy has a term, that means it ends at some point in the future. If you only want a policy to cover you until your kids are out of the house, for example, you might select a term. What a policy is permanent, that means it continues as long as you keep paying it.
The main benefit of a term policy is that it will almost always be cheaper. Conversely, the advantage of a permanent policy is that most versions continue to accrue value. This means they can serve as assets, and it's even possible to sell them if you want to access the cash you've put in. You can also frequently borrow against the value of the policy. Some policies also have accelerated benefit that allows access to the value after certain conditions are met, such as keeping the policy for X years.
If you know you're going to carry life insurance for the next few decades, there's a pretty good chance you'll want a permanent policy. Someone who only needs the policy while they work a dangerous job, for example, might go with a term.
Exclusions
You will want to know what the exclusions on any policy are going to be. These are the things the insurance company won't cover. Depending on why you're seeking a policy, certain exclusions may force you to look elsewhere. The person in the previous example with a hazardous job would want to be sure compensation is payable if something happens in the course of their work.
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