The best time to buy life insurance is when you’re young and have time. With life insurance, your premiums will be cheaper and your coverage won’t change with age.
However, some people don’t purchase it until they are older and many health changes later. It’s unclear whether having a large family will affect the cost of life insurance from age 19 or 20 onward; it’s better to find out sooner rather than late.
Keep in mind that there is an increase of up to 30% as soon as you turn 50 years old. Others may be persuaded by the fact that they’re simply healthy enough to not need it yet, but still want peace of mind when considering their premium payments each year over the next three decades or more.
Here are a few other factors to consider:
- How much life insurance you want: If you have the goal of buying enough life insurance to replace your family’s income, then you need to make sure you’re getting the amount of coverage that you really want. Just because it sounds like a lot doesn’t necessarily mean it is. In addition, it’s easy to get confused when trying to determine how much coverage to buy; many people buy more than they need and others don’t buy enough at all.
- How much life insurance do you need?
If your entire family is covered by a death benefit, you can go with this amount. If you do not have a spouse or dependents who will receive the money upon your death, then it’s better to purchase more coverage than necessary.
- How much life insurance you have:
You might be surprised to find out how much life insurance you currently own; there is no reason to think that it’s more than you actually need. In fact, the average American has less than $50,000 in life insurance protection for their families; this is too low for most families. If you don’t have enough, then it might be time to think about buying “more” and not “less.”
- How much life insurance do you want to cost? Take your current life insurance coverage, add your estimated income and subtract what you would like to spend annually on life insurance for the next 30 years. The difference is how much life insurance coverage you need. Of course, this doesn’t account for any expenses that may come up during the next three decades like a major illness that could take a significant chunk out of your income or some expensive grandchildren that will require life insurance. Also remember to add in personal items such as college tuition, vacation home and furniture purchases on a yearly basis.
- What happens if you die?
According to an Allstate survey, only 25% of respondents could answer this question correctly. The correct answer is the proceeds from your life insurance will be used to pay off any debts and to cover any funeral expenses so your family members can be taken care of right away. Also, the money will go on to help with bills and other costs associated with grief and/or loss.
- How do you want your family handled financially?
This one is rather obvious; you want your family to be okay financially after you die. The most important thing to think about is who will take care of your house and/or other assets, and how much money you want for funeral expenses.
- How you want your family handled expensively:
The most important thing to think about is whether the money from the sale of your home goes toward the funeral expenses or towards paying off debts. Is it better to have all but six months of payroll go toward bills or save them to have a lump sum available for your final days?
- How your health affects your life insurance:
If you have serious health issues, then you can’t be sure how long you will be alive. You may not need life insurance at all if your family knows that they can continue to live while you are alive and rely on other sources of income.
- If you have medical cost: Be aware that your life insurance company will try to limit the pay out if they know that a medical problem exists, or the medical costs are high. Also, make sure that your coverage is going to cover any future medical costs and not just pay off debts.
- What else you need life insurance for:
Remember that life insurance is not just for death. It’s also for financial security. That means covering hospital stays, long-term care, and any other costs that may come up in your lifetime such as illnesses or accidents that take away from your income or force you to stay home from work because of the injury or illness. Remember, a lot of these costs are going to be higher by the time you’re 80 years old in comparison to when you’re 50 years old.
- When can you start?
Some people get life insurance when they are 55, 60 or 65 years old. They have established their income, but have less time to use their money. For most people it’s much better to buy life insurance while they are in their 20s and 30s and have more time to enjoy the income that the extra coverage provides.
- Who else has insurance:
If you buy enough life insurance, then you might be covered by the previous insurance policy that your spouse or other family members had in place for themselves. Sometimes this can reduce the cost or make it unnecessary to buy additional coverage; other times it might not provide enough coverage on its own and you need additional life insurance as well.
- If you can afford life insurance or not:
If you don’t have enough money set aside to pay for life insurance, then it’s not a good time to buy any coverage. It’s a lot better to save up and get the money together in order to pay for the premiums each year rather than having to make monthly payments on your life insurance policy.
- Who else needs coverage:
Not everything is about you; let’s face it, you don’t live in a bubble and there are other people who need your help financially and emotionally, such as your children, parents, brothers and sisters.
- If you buy life insurance, who do you lend it to?
It probably wouldn’t be wise to lend your life insurance to your current employees or ex-spouse, especially if you have a lot of debt. In the case of a loan from your life insurance, the insurance company (the company you borrowed from) would expect that you would pay off the loan and then they would take over paying out on the policy.
- When can you sell it?
You should hold onto it as long as you can; it’s not something that you want to sell for a loss or for a low amount because then it’s no longer valuable to either party. For example, if you have $50,000 worth of coverage and you sell it for $10,000, the company has to pay out your $50,000 policy minus the $10,000 loss. If they choose to keep that money in your policy and let it ride out until you die, they will naturally make more money.
- What happens if you die before policy maturity?
Usually there is an additional amount called “surrender charges” and/or interest charges when a policy is surrendered early. This can add up to thousands of dollars that you don’t want to pay before passing away.
- Where do you buy life insurance?
You can buy life insurance from any insurance agency or agent, but make sure you thoroughly research the company and their plan in order to find the best coverage for your situation.
- How much is the reasonable cost?
Reasonable costs include: upfront money for a starter policy, monthly premiums until maturity, medical payments and other surcharges or deductibles that may apply. If you want to take care of home ownership expenses or college costs you should consider paying a premium that is a little more expensive than the minimum amount required by your state. You also want to think of all the extra insurance you will use beyond just paying death benefits; medical payments, home care expenses and life or permanent income replacement are all possible extra situations that may arise.
- How much should you spend? The amount you will put in a policy depends on your lifestyles, ages and financial situation. If you have low income and little savings, it’s not wise to buy a whole lot of coverage because you can’t afford to pay the high premiums that would be required over an extended period of time if your policy is made payable in whole or in part. You can buy as much as you can afford at any given time, but too much coverage might be higher than necessary.
- What you need to know before you buy:
Maybe you have a new baby who is dependent upon your income and wouldn’t be able to live without it. If so, then consider purchasing additional coverage for the child. Or maybe you want to buy life insurance for your retired parent, who will need financial support when they lose income from no longer working. Make sure that you find out how much life insurance coverage that would be appropriate for a specific situation, or you could end up spending more money than you should on premiums and not need the policy at all.
- How do you buy the right amount?
You want to look at your income, savings and other assets so that you can figure out the amount of life insurance you need. Also you want to take into consideration issues such as any debt or medical bills that are already in place. You should get a good estimate on how much life insurance you will need and how much it will cost every month until it matures. It’s a good idea to compare prices from several different companies so that you can find the best value for the price which gives you the best deal in terms of coverage and premiums so that your family gets protection while they have time to adjust financially.
- What if you need life insurance now?
If you need life insurance now, then it’s time to find a company that can provide you with the coverage that you need at the time that you need it in order to pay your expenses while you’re waiting for your policy to mature so that your family has income and peace of mind.
- How do you buy life insurance?
It’s important to hire a financial advisor for life insurance policies because the expert will know about all of the different options and rates available to you. It will allow the advisor to help choose what is necessary for your personal situation and situation, as well as how much coverage is required in order for you to be financially protected. There are many different factors that go into the buying process and it is important to find a reputable financial institution, compare the prices and then decide which one to work with.
- How do you start?
You can call an agent or broker at an insurance company, or you can apply online to see how much coverage will cost you on average. Then you can compare prices between several different companies so that you can get an idea of who will be able to provide the best coverage for your money. It’s a good idea to shop around for a policy that gives your family peace of mind and protection while they adjust financially because in general life insurance helps them feel more secure about their future security and living situation.
Getting in-depth with life insurance
A life insurance policy is a contract that pays a death benefit when the insured individual dies. You pay premiums for the term of the contract, typically 20 or 30 years. It is a contract between you and an insurance company. The life insurance company agrees to pay a set amount of money to your beneficiary if you die during that time period.
These contracts can be expensive: fees, commissions, and administrative expenses can add up to 20% or more of your annual premium payments in some cases. You should compare these costs with other options such as term insurance and guaranteed universal life (GUL) policies before committing to a long-term life insurance policy. You should avoid insurance agents that promise “free” policies; they are not free because you must pay for them with high insurance costs and excessive fees.
Once you purchase a policy, there may be additional fees for lapsed coverage, changes in beneficiary, or a death claim. These fees can further reduce the return on your premium payments.
The most expensive type of life insurance is whole life policies (also known as straight life) which are designed to be held until maturity and paid in full using a single premium or multiple premiums if the policy is paid in installments. Whole life policies differ from term insurance in that the premiums are not level; they usually increase yearly. The savings element of whole life policies is what allows them to be sold by agents at a large profit margin and still provide the benefit of cash value accumulation.
What are some particular points to consider?
There are some particular points of emphasis when it comes to buying a life insurance policy:
a) You will want to get several estimates from different companies so that you can find out the best possible policy for your budget.
b) You should avoid policies with high administrative or sales fees.
c) You should ask the agent to explain any language in the contract that is unclear, so that you can understand clearly what you are buying.
d) If the agent explains a policy and it seems too complicated to you, you may want to ask for help from another professional source because some policies are very confusing and difficult to understand.
It’s important that you not just agree with what the agent is telling you about a policy because they are selling it, but rather make sure that you fully understand all of your options before making a decision on which one to choose.
e) You should find out how the agent is paid, such as by salary or commission, so that you know whether or not the agent has a financial incentive to sell you more insurance than you need.
f) If you have gone through a rough patch financially and have been unable to make your premium payments on time, ask the agent how many of their clients have been able to get discounts or other incentives due to late payments.
If you are the first one, then you may want to reconsider your choice of companies because this is a bad sign. If they are unable to offer discounts to clients who have been late making their payments, you should be very wary of the company.
g) You should find out what happens if you fail to make your payments because if the company cancels your policy and you were unable to pay for it for whatever reason, and if the company does not give refunds for unused coverage, this could be a serious problem.
h) You should also ask about cancellation fees in case you decide to cancel your policy prior to maturity due to financial difficulties or other reasons.
The best way to obtain the lowest possible insurance policy cost is to shop around and compare prices at different companies before you make a decision. A financial professional can help you with your insurance needs.
It is important to conduct your own research, get quotes from several insurance companies, and read the company policies before you buy life insurance.
Buying a policy that is too expensive could cost you more money than you could afford to spend, and also leave your loved ones with less money in their pockets.