How to Buy Life Insurance
1. Decide if You Need Life Insurance. Though everyone’s personal and financial circumstances differ, a life insurance policy can be a valuable safety net. That’s particularly true if your family or beneficiaries would face financial hardships if they lost your income, or you want to cover end-of-life expenses, including funeral, burial, or medical costs.
2. Determine How Much Life Insurance You Need. The amount of life insurance you need depends on various factors, including your personal and household income, the needs of your dependents or prospective beneficiaries, and your financial goals.
3. Determine Which Type of Life Insurance Is Right for You. There are two primary types of life insurance to choose from: term life, which lasts for a set period of time, or permanent life, which covers you for as long as you live.
Term life insurance policies typically have fixed, or level, premiums that stay the same for the duration of your policy. It offers a guaranteed death benefit, or a guaranteed sum of money, as outlined in your contract. This type of policy does not carry an investment component, and you cannot borrow against or withdraw from it while you’re alive.
Permanent life insurance also have fixed premiums in most, but not all cases. As with term life insurance, there is a death benefit that is paid out to beneficiaries after you die. Permanent life insurance also carries a cash value component, which is separate from the death benefit and functions similar to an investment account from which you can withdraw or borrow available funds.
4. Decide if You Need Life Insurance Riders. Riders are additional benefits or options that you can add to your policy to create customized coverage that meets your specific needs. There are several types of riders available to policyholders, and each can impact your premium.
5. Purchase Your Policy. Once you’ve identified the type and amount of coverage you want, reviewed quotes, and compared companies, it’s time to begin the application process. In some cases, you can receive a quote and purchase a policy online, while other companies may require you to work with an agent or representative in order to purchase coverage.
