How Tos: Steps For Buying Life Insurance

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How Tos: Steps For Buying Life InsuranceBuying life insurance is an easy way to protect your family. If you know what to look for, you can get the coverage you need at a price you can afford. If you're single and don't want to leave money to anyone, you may not need life insurance. But as you take on more responsibilities and your family grows, your need for life insurance increases.

Step 1, Figure Out Your Needs

Who needs life insurance? If there are individuals who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple's retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations.

Step 2, Determine Insurance Type

First you need to determine what are the benefits and advantages of each type insuring. With term life you will be getting policy for a specified period of time or term as it is commonly called. If you die within the specified time, your beneficiaries will receive the financial benefits covered under your policy. If you die after the policy expires, your beneficiaries will not receive anything. Though there is another type called renewable term which can be an option. But this type of getting insured does not have the added value feature.

For those people who favor the term life insurance argues that by buying term and investing the difference you are paying far less than a whole life. This is where most people have the dilemma of choosing between term and whole type of insuring. But there is no debate as to which is cheaper as term will always be a lot cheaper than whole life type of insurance.

Step 3, Choose The Coverage Amount

Now think about how either of you would fare economically if the other spouse were to die. Would there be a gap between the survivor’s income and obligations? Would the survivor be saddled with a ton of debts?

If you have a gap between the annual income the survivor would have and what would be needed, determine approximately how many years that gap would persist. Multiply the gap by the years to come up with a rough estimate of how much insurance you’ll need; then add in any big debts–maybe your mortgage or the estimated amount that you think the kids would need for college. Finally, round up to the nearest quarter-million. In other words, if you think you need $350,000 in coverage, round up to $500,000. If you’re buying term coverage, it’s cheap and better to have too much than too little.

Step 4, Shop For The Right Quotes

When comparing life insurance quotes, make sure that the policies and insurance coverage you're comparing are similar. And remember, any policy that you buy is only as good as the company that issues it. Find out what rating the company has received from major ratings services, such as A. M. Best or Standard & Poor's. These companies evaluate an insurer's financial condition and claims-paying ability. The company giving you an insurance quote should provide you with this information. You can also contact your state's department of insurance to find out more about an insurer's record.

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