6 Life Insurance Tips and Advice for Buying Your First Policy
Just about anyone could give you health insurance tips but life insurance is a little trickier, especially if you’re a first time buyer. There are probably dozens of confusing questions in your mind, the answers to which might just lead to more questions!
How can you go about deciding which policy to invest in, then?
The first step is understanding that while some policies can help you live a more comfortable life, particularly as you approach your senior years, life insurance plans are primarily designed to provide financial security for your family. They can also be used to pay for college education, mortgages, charitable bequests, etc. and play a key part in estate planning too.
To make the daunting task of choosing the right policy a little less complicated, here are 6 essential life insurance tips and tricks that you should consider:
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Think about Why You Need It
A good place to start is figuring out whether you need life insurance at all. Just about everybody will need a life insurance policy at some point, but don’t jump on the bandwagon just because someone told you it’s a good idea.
If you’re still unsure about whether you need it or how much you need it, you could always get a “starter” policy, typically a term life insurance plan that provides coverage for a period you choose. They’re much cheaper if you’re young and healthy, so look into them now.
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Think about How Much You Need
The death benefit from a life insurance plan is the money your heirs receive in the event of your death. There are a variety of online calculators that can be helpful, but remember that these are just tools that can offer a rough estimate. A good ballpark figure is 8 times your annual income.
If you want a slightly more detailed method of estimating how much your family will need after your death, factor in the immediate expenses of death (funeral arrangements, etc.) and add recurring expenses of school or college fees, mortgages and the like.
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Look for the Right Policy
Once you’ve got a figure to work around, it’s time to start thinking about the policy itself. One key area of focus is inflation, and your policy should cater for all the one-time expenses when you die as well as recurring expenses at a growth of 7% each year.
The most basic options that are available include term life (with cheaper premiums), and permanent life (with better coverage). Apart from these plans, there are many other life insurance options for you to explore, so do your groundwork thoroughly.
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Look for the Right Provider
The company providing the insurance policy is literally the backbone of the policy, so you want to choose one that has a reputation as a reliable provider. To pay off the claims on your policy, pick one that offers a highly prudent manner of investing premiums.
The insurance provider also needs to be around long enough, which is why people so often choose to invest with well-established companies. Picking a reliable insurance provider ensures that you or your family can actually receive the payments.
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Consider Getting a Professional Opinion
As a first time buyer, you’re bound to have a few questions and more than a little confusion with understanding policy conditions and benefits. If you’re unsure, a professional opinion might be a better idea than seeking life insurance tips and advice from friends and family.
An experienced life insurance advisor or wealth management expert can help you with factoring in essential aspects of your needs, your family’s needs and your financial scenario, as well as suggest which plans will work for your financial goals.
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Learn the Life Insurance Lingo
Insurance policies, like most other things related to money and investments, are rife with industry jargon. Instead of trying to get by with understanding terminology from context, use the internet and learn what they mean as well as their particular implications.
Apart from common terms like ‘premium’, ‘beneficiary’ and ‘dividend’, focus on terms that are specific to life insurance, like ‘death benefits’ and ‘death claim’.
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