Making an important decision can be intimidating. When faced with complexity and too many options, you may prefer not to think about the all important details before the purchase. Buying life insurance for the first-time is a decision that could shape you enduring view of life insurance. If you make a poor decision, you would regret it. A good decision would leave you with a favourable opinion. Most people only understand life insurance after they are in possession of a life insurance contract. These tips should give the first-time buyer enough confidence to avoid buyer’s remorse:
1) Put life insurance in perspective
You should whether you really need life insurance. That you’re alive is not sufficient reason to get life insurance. Its role in your financial plan should be understood before you make your first acquisition. Ask yourself the following questions:
i)Do I have financial dependents?
ii)What is the likelihood that my family situation, career or business situation would change in the near future?
iii)Do I have other protection products like health insurance and disability income in place?
iv)Why am I making this purchase right now?
These questions would help you answer other questions that come along like what type of insurance and how much of it you will purchase. As a first-time buyer it is important to get it right initially, since that can save you a lot in the long run.
2) Estimate your coverage properly
Having an idea of how much you need would prevent you from being convinced to purchase more insurance than you need. There are needs estimators online that you can use freely. These would give you a representative coverage figure. Working with a trusted agent or advisor in determining your need is also crucial. However, having a basic idea of the process would let you know just how trustworthy your advisor is.
3) Learn the options and examine them according to your needs.
There are myriad options available where life insurance is concerned. Endowment insurance, term insurance, whole life with dividends and fixed universal life are some of the plans available. Each has its own context. Ignore those who over-simplify life insurance by saying that term insurance is always better or permanent life insurance is king. Your needs and preferences are what should determine your purchase. You should ensure that your decision is based on fact and substantiated opinions. Options vary among plans and insurers. It is critical to compare and contrast various plans and companies. All insurers are not the same.
4) Determine if you would like optional supplementary benefits with your plan
These benefits range from critical illness riders to disability income benefits. The benefits may vary according to the plan that you choose. You can have a comprehensive package that includes health insurance provisions, life insurance and a retirement savings plan. Alternatively, you could just have basic life insurance with a double indemnity benefit.
5) Understand the clauses and provisions that may be included in a policy contract
Contracts may contain non-forfeiture options or reinstatement provisions for example. It is important to know and understand these provisions. The policy loan provision is also critical. Would you be charged if you withdraw or borrow from the cash-value where permanent insurance is concerned? These are the understated aspects of life insurance that can either cost you or work to your benefit. You must be aware of them.
It is important to treat purchasing life insurance as a process. It does not have to take weeks or months. However, it should only occur when you have sufficient information and are comfortable that you’re getting value for money. Doing a bit of research and getting some objective feedback from knowledgeable people that you trust should be part of your information gathering. Comparison shopping is the next core activity and includes comparing plans and insurers. Insurers have different strengths. Certain insurers may even have better investment strategies than others. That will affect how stable the company is or how cash-value plans accumulate. Once you follow this advice, your first policy would be a financial blessing, not a curse.