Responsibly purchasing life insurance requires the same preparation all other endeavors require. I recently purchased a policy and was quickly overwhelmed by all the available options. Since I’ve sold insurance as a telemarketer I knew where to start.
Who is going to be the beneficiary, and what will their needs be? On the surface the answer seems obvious, but the needs of your beneficiary will determine how much money you will need to leave behind. If you have a young family you will need to be sure there is plenty of money to pay off the funeral, the house, the car etc., so your spouse won’t have to worry about meeting the larger expenses, and can more easily meet the financial needs of the family. If you don’t have children your spouse’s responsibilities won’t be as demanding, so the death benefit may not need to be as high. And if you have no children you probably don’t want to spend much more on life insurance than what will be necessary to cover your funeral/burial expenses, and any outstanding debts you may have.
Why do you need to purchase life insurance? Again the answer seems obvious on the surface; however the answer will determine what type of insurance you need to purchase. Whole life doubles as an investment tool. The premiums may increase as time goes by, but the money invested will grow creating a nest egg, (possibly for retirement, or college tuition) or allowing for a larger payout upon a later death. A term policy typically costs less and the rates are usually locked in. Money paid into a term policy can not be retrieved if the insured does not die prior to the end of the predetermined time period of said term. There is no time allotment for a whole policy. These are the most significant differences between whole and term. Once the predetermined time period of the term policy expires the rates will change to renew the policy.
Commerce on the internet can be misleading. Start the initial search with a well known company, so you can learn details of some of the policies available for your specific needs. A.M Best is likely the leading rater for insurance companies. If the company you are considering purchasing from does not have a rating from A.M. Best you may want to find out some background information on that company. A.M. Best uses a letter ratings code for the companies they rate. The more “A”s the better the rating. Also consider which payment options best fit your budgeting lifestyle.
Keep yourself organized while shopping. Create one folder in your favorites list dedicated to the insurance companies you are investigating, so you can make all you comparisons on the computer prior to making a final decision. Also write all your questions down in a separate Word folder as you do your research so you can ask the same questions of each insurer. Good Luck.