Life insurance can be a critical part of your financial portfolio, but finding the right plan can be complicated if you’re a first-time buyer. Here are three quick tips for buying life insurance to help you make sense of all the choices you’ll face.
Life Insurance Tip #1: Determine How Much Life Insurance Coverage You Need
The goal in calculating the amount of life insurance coverage you need is to make sure your family receives enough to pay bills and maintain their standard of living. One general rule of thumb is to purchase enough coverage to replace five to seven years of your salary. If you have very young children or significant debt, you might aim to replace up to ten years of your salary.
Another approach is more holistic. First, make a list of all current and ongoing expenses, like the mortgage payment, utilities, student loans, credit card debt, healthcare costs, and childcare. Then, estimate future expenses, like college tuition or your spouse’s retirement. Next, itemize any significant assets you own that could provide cash or income. Having this comprehensive list can help you gauge how much your family will need in the event of your death.
Life Insurance Tip #2: Find the Right Type of Policy
Once you’ve determined the amount of coverage you need, you’ll have to decide which type of policy is right for your family.
- Term life insurance generally offers the highest benefit for the lowest cost. It covers a specific period of time, usually 10, 20, or 30 years. If you decide later that you’d prefer a more permanent plan, you may be able to convert your policy.
- Whole life insurance is also called ‘permanent’ life insurance. These plans last as long as you continue to pay your fixed premium amount. Part of that premium goes towards cash value, allowing you to accumulate tax-deferred savings.
- Universal life insurance is another type of a ‘permanent’ life insurance. It includes a combination of cash value accumulation along with flexible premiums and riders. Plus, you may have the ability to adjust your benefit amount as your needs change.
Life Insurance Tip #3: Hang onto Your Paperwork
Although it might seem that once the paperwork is signed you’re done, you aren’t. Make sure your family knows about your life insurance policy and where it will be kept. Insurance companies aren’t required to find out if policyholders are still alive, so it’s up to beneficiaries to come forward and make sure they receive their benefit.
You can scan and store documents electronically and/or make photocopies to keep at home. Then, save hard copies someplace safe, such as with your attorney, in a safe deposit box, or in a fireproof safe.
Bonus Life Insurance Tip: Talk to a Licensed Life Insurance Agent
HealthMarkets licensed agents can help by not only offering tips for buying life insurance but also finding the right plan for you and your family. There’s no cost to you for agents’ services. Call 24/7 at (800) 917-4169, or meet with a local, licensed insurance agent today.