Life insurance is a vital part of family financial stability. Like a lot of people, shopping for coverage may make you feel stressed. Here are 8 tips to help you!
Having a relationship with your insurance agent that allows you to relax and discuss your needs openly and frankly is key. At Liveoak Agency, we want to make sure you are covered adequately and affordably for the real risks you face. These questions and more are where we start when designing your best coverage options.
1. First you need to decide if you actually need life insurance
It is true that most people should have life insurance, but not every single person should. If an individual has no one who depends on them financially, or if someone has no debt and would be able to leave their estate with adequate cash to pay for its taxes and expenses, they likely do not need a life insurance policy. The vast majority of people don't meet either of these criteria and therefore likely do need life insurance.
2. Determine exactly how much life insurance you really need
This requires and answer to two questions:
Financially, what resources will be left to survivors after you die? Keeping it simple, consider just three types of resources: (a) Social security / retirement-related survivor benefits; (b) group life insurance; and (c) all other assets and resources. Consider also when any of these resources will actually become available for survivors. Social security survivor benefits are generally immediately available for a surviving spouse with dependents, however, this is true only after age 60 if there are no children / dependents.
What specific financial needs are your survivors going to have?. Three categories of requirements are typical: (a) final (burial) expenses; (b) debts (loans, credit cards, etc); and (c) income needs (basically the resources you were providing for food, shelter, education, medical expenses).
To determine how large a policy you need, simply subtract your survivors’ financial resource needs in step #2 above from their financial needs in step #3. It is not uncommon for people to find that they are underinsured when they check using these questions. Using shortcuts like buying some magical multiple of annual income is usually inaccurate.
3. Give some thought to other objectives for your life insurance benefits
Beyond simple death benefits, some kinds of life insurance policies have a savings or investment feature that can be used for more than simply paying death benefits.
4. Decide what kind of life insurance policy meets your needs most specifically
There are basically just three types of life insurance policies—these are known as term life, whole life and universal life. Term policies are best suited if you only need the insurance for a specific or limited period of time, or if you are on a limited budget. Term policies have lower premiums and can be a good fit for some people. More typical long term / permanent insurance requirements, with savings accumulation options, are best addressed with a whole or universal policy.
5. Explore the option to add any “riders” to the policy
There are a lot of rider options, but two that are wise to consider—a waiver of premium rider and the guaranteed insurability rider. Policies may come with one or both included with the basic contract. You should always make sure to add them if it doesn't. A waiver of premium rider pays the life insurance policy premium for you if you become disabled. A guaranteed insurability rider permits you to increase the death benefit without being required to provide evidence that you are in acceptable health.
6. Consider several different policies from different carriers
There are quite a few ways to save when buying life insurance, but it isn't always as simple as paying a lower premium immediately. Life insurance is a very competitive business and quotes vary significantly between companies. At Liveoak, we have a wide variety of carriers to choose from, so you know you're getting the best choices.
7. Decide on annual or installment premiums
In most cases, it is better to pay annually rather than in installments because there can be significant additional charges for paying smaller amounts more frequently.
8. Be sure to inform your beneficiaries about your life insurance policy
After the policy has been issued, tell your beneficiaries about the company that issued it, where they can find the hard copy of the actual policy and give them specifics about what you wish for them to do with the death benefit. It is rare for people to be totally unaware they are the beneficiary of a life insurance policy, but it does sometimes happen. You most definitely want to make sure that the benefits of your policy do not go unclaimed. It is best to store your documents in a safe, fireproof / waterproof location so that they can be easily accessed by your beneficiaries.
Everyone at the Liveoak Agency is here to make your insurance selection and purchase process as easy as possible. Call us for a policy review of your insurance today!