Getting life insurance is one of the most financially important steps you’ll have to take in life, especially if you have dependents or plan to have them in the future. Life insurance coverage guarantees you peace of mind that your family members will be protected if anything happens to you.
The process of getting insured can seem intimidating at first. You have to go through the long process of shopping around for policies, applying, and then waiting for approval. You also have to make sure you’re not buying too little or too much coverage.
Thankfully, as long as you do your research, you’ll be able to handle each step. In this guide on life insurance advice, we’ll outline everything you’ll need to know before you buy your first life insurance plan – including why you need life insurance.
Understanding Life Insurance
Before we can go into our top advice for insurance beginners, you need to understand how it works in the first place. Keep reading for our breakdown.
Why Do You Need Life Insurance?
You should consider insurance as a crucial part of your personal finance plan and life plan, especially if you have people who depend on your income (e.g. children, spouse).
Life insurance policies are contracts between policyholders and an insurance company. This guarantees that a specified sum of money is paid out to your chosen beneficiaries if you pass away.
There are many types of life insurance to choose from. You can get a simple term life insurance policy for 10 years, or a more complex whole life cash value policy that allows you to accumulate money in an account.
The life insurance payout is called a death benefit. In the event of your death, this fund can ensure an inheritance for your children or replace your income if you’re the primary provider of your family. They can also be used to cover funeral costs, pay off debt, or fund children’s tuition without forcing your family to dip into their savings.
When Should You Get It?
When you get insured is just as important as the kind of plan you get. If you’re young and don’t have any dependents, you may not need it just yet. However, it’s good to start setting aside a fund for it for the future.
To enforce your policy, you need to pay regular premiums. This amount is determined by your coverage and risk levels. Your risk level is determined by your age, gender, lifestyle, and health status. These variables can change throughout your life, so it’s important to keep these factors in mind when you’re applying.
If you can afford life insurance while you're younger, you’ll likely get better rates. If you plan on starting your family, consider getting insured before or after pregnancy, as gestational health conditions may have an effect on the rates offered.
If you wait too long to get life insurance, you may end up spending more money than if you had gotten insured earlier. This is because the older people get, the more health conditions they acquire – putting them at a higher risk for insurers.
All this is important to remember because companies want clients that are as low risk as possible to minimize paying out. To safeguard against riskier clients, they increase your premium. Planning ahead and researching alternative types of insurance can help save you a lot of money in the long run.
Advice For Buying Life Insurance
Before you start filling out applications, read our advice on what you should prepare for and consider. This will help you minimize any unnecessary expenses and get the right policy for you.
Figure Out The Amount Of Coverage You Need
Our # life insurance advice? Figure out exactly how much coverage you need. If you take out too little, you won’t have adequate protection for your loved ones. Plus, increasing your coverage after it is active is much harder than reducing it. On the other hand, if you take out too much, you’ll be paying unnecessarily higher premiums.
Analyze your situation and figure out what you might need out of your plan. You can use online calculators to get estimates or consult with independent life insurance agents.
Shop For Plans
After determining the coverage you need, it’s time to look around for plans. Don’t settle for the first one you see! Rather, compare quotes that already take your current health status into consideration, and read up on company ratings to find a good insurer.
The type of life insurance you get depends on your needs. If you want long term coverage with added benefits like cash value policies, go for whole life insurance. If you want a simple plan for a shorter amount of time, go for a term life policy.
You’ll want to stay away from anyone that pressures you as a sales tactic. Take the time to read through terms and go through them with insurance agents.
Application And Medical Exam
When you apply for a policy, you’ll be asked for personal information, including your family’s medical history. You may be required to have a phone interview and a medical exam. In a process called underwriting, companies will evaluate you, approve or reject your application, and determine your final quotes.
If you have preexisting health conditions that could prevent you from qualifying for traditional insurance, opt for guaranteed issue policies or other forms of instant life insurance that don’t require medical exams.
Be sure not to lie or leave out anything important. This could be considered insurance fraud, which other companies will be notified of – potentially preventing you from getting insured.
What Happens After Coverage Begins
Once you’ve been approved for your chosen policy, sign the contract, and pay your first premium, your coverage goes into effect immediately. Most types of insurance include a two-year contestability period wherein your insurer can change or cancel your policy if they find out that you gave them false information.
Most people buy a plan and forget about it. It’s important to do a coverage checkup every few years or after a major life event to ensure your life insurance fund still fits your needs. You may need more or less coverage over the years, especially if you get married or have kids.
Ending A Term Policy
When your coverage ends, you can choose to renew it for another period of time, convert it into permanent insurance, or let the policy lapse. Your provider might allow you to convert your term policy into a permanent one without health exams if you qualify.
It’s important to note that if you stop paying your premium at any time, your life insurance coverage will lapse. Some companies allow you to reinstate your life insurance if you wish to. If you die during the period you’re covered, your beneficiaries can file a claim and receive the payout from your plan.
If you have a cash value life insurance policy, you’ll have to speak with your provider to find out if the money from your account can be withdrawn by your beneficiaries. In many cases, your beneficiaries won’t receive the cash amount if you die before accessing it.
Not sure what to do? It’s always safer to get advice from a professional to make sure you make the right decision for your situation.
By doing your research and finding the best policy for your money, you can guarantee invaluable protection for your loved ones if anything happens to you. For more expert life insurance advice, contact us at Wesley LLC. Our team of professionals will get you all the answers you need!