6 Tips When Getting Life Insurance for the First Time

by | Aug 27, 2022

Buying life insurance for the first time can seem difficult and confusing. However, with the right information, you will find that the process is easy and straightforward.

In this article, we will provide you with a few helpful tips for choosing the right insurance coverage. Check them out below.

Determine your current financial situation

Before you can choose a life insurance policy, you should assess your current financial situation. Do this by considering what you have to support your financial dependents, such as an emergency fund, retirement savings, or life insurance through work.

Choose the amount of coverage you need

People often underestimate the amount of life insurance they need. However, it is best to think of what may help to support your partner and children, pay for tuition fees, or cover other long-term needs.

The golden rule is to choose a policy that has a death benefit of at least ten times your annual salary. However, your financial situation and goals may encourage you to choose more or less of this amount.

Choose a policy type

There are two main life insurance types: term life and whole life insurance.

Term life insurance is a policy designed to provide coverage for a certain period, usually between 10 and 30 years. It provides financial support to specific beneficiaries through a particular period, after which the coverage will stop. For instance, you can focus your term life insurance on paying off your mortgage or paying your kids’ college tuition fees until they finish college.

Whole life insurance, on the other hand, is an enduring policy that provides lifetime protection with fixed premiums and cash value. It can be used to cover any situation, like emergencies, long-term care, tuition fees, etc.

Know the factors that influence your life insurance rate

Life insurance companies consider certain factors when determining your life insurance rate. These are physical health, age, lifestyle history, occupation, and many more.

Depending on these factors, your insurance rate can either be cheaper or more expensive. For instance, the younger and healthier you are, the less risky to insure you are considered to be. Consequently, you are likely to get cheaper rates.

Compare life insurance companies to get the best quote

Life insurance rates often vary among companies. Hence, you need to get quotes from numerous companies to determine the one with the best rates.

Luckily, many insurance companies offer free quotes online, which makes it easy to compare and find the most competitive offer. Also, you can hire an independent insurance agent who works with multiple insurance companies and can, thus, get the best coverage for you.

Look beyond the premium

Your life insurance rate is important as it enables you to fit your premium into your budget. However, you need to look beyond the premiums.

If you are buying a cash-value life insurance policy, focus on its internal costs as much as you do the premium. And if you are buying an indexed universal life insurance policy, focus on the guaranteed vs. non-guaranteed parts of the policy.

Also, focus on companies with high financial ratings as opposed to those with low ones.