Buying a Life Insurance Policy
By Jack Landry
Buying life insurance for the first time may seem like an immense task. By following these simple steps you will be able to get the job done in a way that will suit the needs of you and your family.
First, expand your financial vocabulary. This can be done by taking a class on finance, reading a book, or finding information on the internet.
Before you meet with a life insurance lawyer make sure that you know words such as cash value, premium, dividends, and death benefit along with other financial terms.
Second, recognize why you need to have this type of insurance. Most people should get it at some point in their life.
Life insurance is generally a good thing, but for some situations it may be unnecessary. No one should buy a policy just because it seems like a good idea.
It is designed to provide families with financial security in the event of the death of a spouse or parent. In the event of a death of a parent, this insurance protection can help to financially secure the family through the rough times ahead.
It may help pay for mortgages, a college education, help to fund retirement, provide charitable bequests, and generally plays a large role in estate planning. If others depend on your income for support, you should strongly consider getting life insurance.
Depending on the situation you may want to consider purchasing a small starter policy, if you anticipate you will have them in the future. Keep in mind that the younger you are, the less expensive it will be.
Third, establish the amount of coverage you need or want. This will vary from person to person.
The amount of money your family or heirs will receive after your death is called a death benefit. You can get a ballpark figure of the death benefit by using any number of formulas. The easiest way is to simply take your annual salary and multiply by eight.
If you want a more solid figure, you can add up the monthly expense that your family will likely incur after your death. Remember to include the one-time expenses at death and the ongoing expenses such as a mortgage or school bills.
Then, take the ongoing expenses and divide by .07. The number you get will indicate that you will want a sum of money earning approximately 7% each year to pay those ongoing expenses.
Add to that amount any money you”ll need to cover one-time expenses and you will be left with a rough estimate of the amount of insurance you need. Life insurance is about protecting the unknown. Every individual needs to determine what policy and amount is best for their situation.
Fourth, find the policy that works for you. Today there are many choices when it comes to this type of insurance. There are two basic types that are generally referred to as term insurance and permanent insurance.
The first policy is called term insurance. This provides life insurance protection for a specific period of years.
Benefits from term insurance can be used to help pay off outstanding debts in the event of a premature death. Generally, term insurance is the least expensive form of life insurance.
Term provides pure insurance protection only. In other words, it does not accumulate cash value, and generally does not receive dividends.
Whole life insurance is also known as permanent insurance. In contrast to term insurance, whole life protects throughout your lifetime, not just for a certain amount of time.
Another important difference between the two is that whole life builds cash value. This is a major benefit to whole life insurance.
Fifth, find a quality company. Remember, than an insurance policy is only as good as the company that backs it and when it comes to securing your finances you want a secure company.
Be sure to check the business history of the company you wish to get your life insurance policy from. You want to know for certain that the company that issues your policy will be around to service it and eventually pay the death claim to your family and loved ones that were left behind.
Before purchasing, ensure that the company is well established within the industry. Check their history, quality of investments, and overall financial records.
As you search for the right policy, remember these steps and implement them into your search.
Don”t settle for anything less than you need or want when it comes to your policy. When it comes to being there for your family, your life insurance policy backs you up.
About The Author
Jack Landry has practiced law in California since the 80s and lectures at many prestigious universities across the country. He recommends (http://www.lifeinsurance-law.com) for life insurance in California