Life Insurance Policy: Buyer’s Tips

By Mitchell Garnett, Director of Operations, and Life Insurance Producer

There are a lot of misconceptions when it comes to life insurance. Many don’t understand just how valuable it can be when it comes to their family’s future. Others have the wrong idea about the costs associated with life insurance…to tell you the truth, it probably doesn’t cost as much as you would think.

The bottom line is: the purpose of life insurance is very simple – it’s to make sure your loved ones – your spouse, your kids, etc. – or other people that depend on you for financial support, will be okay if you die prematurely.

I’m going to give you some buyer’s tips that are some common questions that I receive from my clients when discussing life insurance options. Life insurance is simple to buy, and necessary to use.

How much life insurance do I need?

Not everyone’s life insurance needs are going to be the same. A good rule of thumb to follow is 10-15 times your annual salary. You’re going to need enough to provide for your family’s immediate and long-term needs, in the case that you prematurely passed away. Some other factors to consider are:

Do you have a mortgage? If so, you need to make sure your family’s mortgage will be paid in the event of your death.
Do you have children? They may have future expenses that will need to be covered such as college, and other school expenses.
Are you the breadwinner for your family? If your answer is yes, then try to leave your family with the same lifestyle as before.

These factors are just a few of the things that you should consider when determining how much life insurance is needed for you and your family.

How much does life insurance cost?

Everyone is curious about the cost of life insurance. In many cases, it’s going to be cheaper than you would think and can even cost less than your daily cup of coffee.

The cost is going to be determined during the underwriting process by a few factors such as:

Your age: It’s never too early to begin thinking about life insurance. The best thing about getting a policy when you’re younger is that you’re getting locked into the lowest rates. If you keep that policy throughout the remainder of your life, then you’ll be paying low premium amounts, for the right amount of coverage.
Your health: Getting a policy when you’re at your healthiest is going to be extremely beneficial. The underwriter is going to look for your smoking history, your weight, your family history, and your lifestyle choices to determine your health. Lowering your health risks will also lower your premiums.
The type of policy you’re considering: The type of policy you select will impact your premium amount. The cheapest option is typically going to be term because it lasts for a period of time. The more expensive option is whole life because it will last for the duration of your life. Determining your goals and needs is very important when selecting the right policy and pricing.
The amount of life insurance you’re applying for: You guessed it – the more life insurance you purchase, the more expensive your premium will be. Again, it is important to evaluate your goals and needs for your family to select how much you need.

Do I actually need life insurance?

If you want to protect your family from financial obligations in the event that you pass away, then you need life insurance. A good start to determining if you need life insurance is to ask yourself if you meet any of the following criteria:

Do you own a home?
Do you have any debt?
Are you married?
Do you have kids?

These are just a few things to ask yourself when considering whether you should get life insurance or not.

How do you decide between Permanent, or Whole, and Term life insurance?

This depends on where you are in life.

A permanent policy is going to accumulate cash value. Eventually, your cash value can help pay for your policy premiums if you choose. A couple other benefits to a permanent policy, is the option to take a loan out against your policy. Do you have a child going to college? You could pay for some of the college expenses with the cash value. A permanent policy will last you throughout your life, so while it’s more expensive than a term life policy, there are many benefits that would make a permanent policy attractive.

If you are looking for the cheapest policy option or you only want protection for a specified number of years, then you may want to pursue term life. Why would people only want protection for a specified number of years? Well, many people pursuing term life policies do so because they are striving to reach a point in their life where they’re able to pay off their debts and their mortgages. In doing so, they leave their families and loved ones protected by paying off the same debts that life insurance would help to pay.

Should I pay annually or monthly?

Some companies offer a discount if you pay annually versus monthly. If the company that you choose to go with does not provide a discount, then there is no downside to factoring in your life insurance cost into your monthly budget and making individual payments.

Do you have any tips for purchasing life insurance?

Be sure you completely understand all that your policy has to offer before making a decision. Don’t always just go with the cheapest policy or company, but ask your advisor the benefits of each option and educate yourself on the riders/endorsements that are available with your policy.

You can never ask your agent too many questions. Purchasing a life insurance policy should be based solely on your individualized needs. It’s important that you make a well-informed decision for your family’s financial future. Having an agent that you can trust, that will assist you with making your decision, will help you immensely.

If we can assist you with your life insurance goals, we would love the opportunity.

Mitchell Garnett

(205)-221-8674

mgarnett@byarswright.com

999 Rocket Way

PO Box 277

Gardendale, AL 35071

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