4 Important Questions to Ask Before Buying a Life Insurance Policy
Are you in the market for life insurance? Finding the right coverage at the right price can be daunting. You are probably wondering what are the key points you should know. To get you started, here are the first four questions should you be asking yourself and your life insurance agent:
1. What are you looking to accomplish by buying life insurance?
You’re probably looking to protect your family financially in case of an early death or maybe it is to protect the mortgage on your home so if something were to happen to you the mortgage could be paid off. Other reasons such as providing for your children’s education or leaving an inheritance to your family members or maybe you want to leave something to your favorite charity.
2. How does life insurance work?
When you purchase a life insurance policy, you’re buying a contract from the company that guarantees, upon your death within the contract period, it will pay a preset amount to whomever you have listed as your beneficiary. These proceeds are usually tax-free and will be paid directly to your beneficiary.
3. What types of life insurance are there?
Term Insurance: This type of life insurance policy will cover you for a specific time period (called a term), such as 10, 15, 20 or 30 years. At the end of that time period, your policy will either cease or the premium may increase as it is at the end of the specific term that you purchased.
Permanent Insurance: This type of life insurance policy covers you until your death, regardless of your age and as long as the premiums are paid to date. Some of the permanent policies have cash value and dividends paid on them.
Term insurance lets you buy the most coverage for the least amount of money as it is only for a specific time period. Whereas, permanent insurance is typically more costly but your coverage would be for the rest of your life.
4. How much coverage do I need?
Ask yourself, how much do you need to pay off debts, including my mortgage? Also how much will your family need to maintain the same lifestyle after you have gone? A good rule of thumb is to purchase at least 10 times your annual salary (or more, if you can afford it). Keep in mind though, that it is better to buy a smaller policy with premiums you can comfortably afford than to buy a bigger policy that you have to let lapse because you can’t afford the premiums. These are just a few pointers for you as a guideline when it comes to shopping for life insurance.
About the author: Pam Fortier has been in the life insurance business for over 30 years. She also holds both a LUTCF designation and a CISR designation. Pam is adept at helping clients select the coverage they want at the price they can afford. You can contact Pam at 1-800-651-1953 or PFortier@Pivot.com.