Buying life insurance for the first time is easy. Here are four simple steps to buy a life insurance policy.
1. Determine who will be the beneficiary of the life insurance policy. You need a primary and secondary beneficiary. If the primary beneficiary does not outlive you, then the life insurance proceeds will go to the secondary beneficiary. Be clear on naming the beneficiaries because vague names on a policy could result in adversity. For instance, if you want the proceeds going to your wife, write her full name on the policy. Otherwise, proceeds could go to an ex-spouse. If you want to give the life insurance proceeds to your estate, it will go through the probate with the rest of the assets. The probate will take time, but life insurance pays immediately.
2. Calculate the financial needs. The calculation is simple. Add up all the current and future financial needs. These include funeral expenses, mortgage, school, and other financial matters. Take this total and subtract it from the beneficiary’s liquid assets. This includes savings, earnings, and other investments. The financial needs subtracted by assets equals the amount of life insurance needed.
3. Select what type of policy you want to buy. Life insurance is available as term or permanent. Term life insurance will last for the term bought, whereas permanent life insurance is for the whole life. Term life insurance offers the greatest amount of coverage for the lowest premium. However, at the end of the term, you will not be able to get back the premiums you made. For permanent life insurance, the premiums are higher, but you have access to cash, and the premiums are flexible.
4. Buy the policy. You can purchase life insurance online or through the mail, but having a life insurance agent has benefits. The agent will study your financial situation and evaluate the ideal planning strategy for your long-term financial goals. It is a good idea to get an insurance quote online. You can take this quote to an agent and see if the agent can offer the same policy at a competitive rate. If they can’t, you can order it online.
Secure your policy by making payments on time. If you chose to buy from an agent, carry through with the financial advice.