Buying Life Insurance: Tips for the First Time Buyer
The following tips will help make the process of buying life insurance for the first time easier.
Last updated on January 17th, 2019
When buying life insurance for the first time there are many factors to consider. A visit with an agent in your area can help aid you in determining your coverage needs. You can base your decision for the type of policy you need by following a few basic tips. However, there are various policy types that you need to consider.
Life insurance is a need that is required at some point during an individual's life. Typically, you will use a policy to provide for your family members. A policy is used to provide financial security if you or any spouse or parent dies.
Proceeds from a policy can be used to pay for a funeral, mortgages, and for estate planning. When family members are supported by your income then consideration to the purchase of an insurance policy is required.
You can determine the amount of coverage you require by using an online calculator. The amount given to your heirs from a policy is known as the death benefit. To easily calculate an estimate for the amount of insurance that you need take your annual income and multiply it by a factor or eight. You can also do this by adding up all of your current expenses. Divide this amount by 0.07 to calculate a lump sum with a 7 percent interest rate that is required to cover these expenses.
Consult with a local insurance agent to get a better idea of the amount of insurance that you need. To do this you can consult with friends or family members to see if they have a recommendation. The agent is able to help you by recommending various types of products. You have the option to obtain a Term Life policy, a Whole Life policy, a Universal Life policy and a Variable policy.
Term life is a policy that provides you with insurance for a set number of years. You can obtain a policy ranging from 10 years up to 30 years. This is the simplest form of insurance as it does not offer you any type of additional type of benefit. A term life policy can be converted to a permanent policy when the term for the policy ends.
Whole life is a form or permanent insurance that provides you with additional benefits. This is a type of coverage that will be in effect for the length of your life. This type of policy accrues a cash value that is based on the amount of premium or a dividend. You can also borrow against the policy that you need to pay back or the amount will be deducted from the death benefit.
Universal life is also a type of permanent insurance that offers a tax-deferred cash value. The amount of coverage can be raised and lowered based on your current needs. You can also change the price paid for the premium and when ti is paid.
The last type of permanent life insurance that you can consider is a Variable life policy. When you buy a variable policy part of the premium can be used with various options for investments. The benefit that is paid by the policy it provided tax-free to the beneficiary.
Buying life insurance for the first time needs be done when an individual in young. The cost of a policy increases as an individual ages.