A Helpful Guide to Buying A Life Insurance for The First-Time

There are numerous financial milestones in life to set up in advance, like saving up for retirement, buying a home, and paying for college. Aside from these massive planned expenses, it’s wise to save for unexpected and unanticipated events too. 

Sudden illnesses, home repairs, or even death can occur. Each of these unforeseen events can come with an expensive price tag. Fortunately, life insurance is one option for protecting loved ones and building up more financial security.

However, it can be extremely confusing and challenging to know what policy to get with many options out there. This confusion is one of the main reasons people choose not to have life insurance. For a little help, here are things to consider that will help you find the right policy.

Current Financial Situation

Before identifying what kind of life insurance to get, you first need to assess your current financial situation. To do this, you can ask yourself the following questions:

How much are your monthly expenses? How financially stable is everyone in your household or family now and for the next several years down the road? What type of debt (mortgages, car loans, student loans) do you have right now that would be left unpaid after you die?

The answers to these questions will help you understand what type of life insurance to get and how much life insurance coverage you might need. 

For example, suppose your family has significant debt and other obligations that need to be paid off after you die (like a mortgage). In that case, it’s best to get a more comprehensive life insurance policy. On the other hand, if everyone is financially stable with no debts or loans, then you might not even need any coverage at all.

Figure Out How Much Coverage You Need

When you buy a life insurance policy, the amount of coverage determines how much money your beneficiaries will receive upon death. However, this number isn’t as simple to figure out as it sounds because so many factors come into play when calculating the right amount.

The first thing to consider is whether or not anyone would need financial support if you died. If the answer is yes, start by estimating how much money that person would need per month. 

Next, think about your debts and funeral costs. Funerals can be costly, so it’s essential to have a realistic estimate of what they might cost. Other factors to consider are ongoing monthly expenses, such as bills and rent, and the amount of money you have saved up.

A financial planner or insurance agent can help you figure out the right coverage amount for your unique situation or life insurance within your budget

Choose A Policy Type

There are different life insurance policies: term life insurance, whole-life policy, or permanent (universal) plan. Each of these policies has its own set of pros and cons that might just fit your needs perfectly.

A term life insurance provides protection for a designated period at an affordable rate. In exchange for this coverage, premiums are usually lower than those for other types of life insurance policies. If you pass away during the policy term, your beneficiary will receive a death benefit payout.

Whole-life and permanent (universal) plans offer lifetime coverage and are more expensive policies when compared to term life insurance. However, the premiums remain level throughout the life of the policy, and your beneficiary will receive a death benefit payout.

Multiple policies can be taken out at once, and you may even want to plan for the eventuality of multiple family members needing life insurance in the future. It’s wise to check with an independent agent who provides free quotes on different types of plans from multiple companies so that you can make sure you’re getting the best rates.

Know What Affects Your Life Insurance Rate

Many factors go into calculating your life insurance rate. Some things that will affect it are: 

  • Your age
  • The type of policy you choose
  • Your health history
  • Your occupation and hobbies
  • Your lifestyle

The younger you are, the lower your life insurance rate will be. The older you get and closer to retirement age, the higher it may go. But if you have a health condition or risk factor, such as obesity, that could cause potential problems in the future with your health, it can raise your rates since companies want to make sure they can pay out what they owe.

Likewise, if you have a dangerous occupation or hobby, your rates may be higher as well. Activities such as skydiving, rock climbing, and racecar driving are just a few examples that could make your premiums more expensive. 

Final Words

Life insurance can undoubtedly help provide financial protection to your family after your death and plan for the future. The problem is that finding the right life insurance policy can be confusing and overwhelming, especially if you don’t know where to start. The tips above can help you make important decisions about finding the right life insurance coverage.