7 Factors to Consider Before Buying a Life Insurance

When thinking about providing for your family after you’re gone, buying life insurance is the perfect solution. Getting life insurance is a huge investment and is considered one of the best financial decisions a person could make, so you will need to choose wisely. You should buy the most suitable life insurance that covers your needs in every aspect. But there are many life insurance companies in the market, and insurance plans could differ from one company to another, which could be a little complicated and confusing.

To ensure that you choose the most convenient one for you, there are a few things to consider and some questions that you will need to ask yourself first. Because choosing a life insurance plan has a major impact on your own life and your family, it is a decision that should be taken carefully. 

What to Consider Before Purchasing a Life Insurance

Coverage

How many family members are dependent on you financially? What is your contribution to the family income? Will your spouse be in debt after you’re gone? The answers to all these questions will tell you how much life insurance coverage you’ll need. It also depends on your liabilities, your own assets, and your current and future income. The amount your family needs to cover its expenses or repay any debt after your death should be less than the coverage you get.

Talk With a Professional Advisor

Many people avoid consulting insurance agents because they will usually try to sell a certain plan without considering what’s best for people. Still, if you’re not familiar with the insurance terms, you might not be able to choose a plan and will need someone who understands everything. Ty Stewart from Simple Life Insure explains that working with an independent insurance broker will allow you to get the best insurance plan for your situation, rather than feeling pressured to sign on with pushy agents. Talking to someone who can guide you through the process without recommending a certain company or pushing you into a specific plan is highly recommended. 

Types of life insurance

There are two types of life insurance: term and lifetime insurance. Term insurance is basically insurance coverage that lasts for a certain time. This type is recommended if you only need it for a while; however, it doesn’t offer any maturity benefit when it’s over. For example, you could get term insurance coverage until your kids grow up or until you reach a certain age. Lifetime insurance, on the other hand, is permanent coverage that sometimes offers maturity benefits and lasts until you’re gone.

If you’ll go ahead with a term coverage, make sure that the company you’re dealing with will allow you to convert from term to lifetime coverage if you ever change your mind. Some companies don’t allow converting the policy after you’ve signed the contract, so make sure to find out before buying it.

How to Choose Between Term and Permanent

Before buying life insurance, whether term or lifetime, you should consider how much you’ll be paying for it. The best way to know the difference is by comparing the cost vs. the benefits of each term and permanent life insurance. Term policy is not always cheaper; you might find some insurance companies that offer permanent insurance cheaper than that of term insurance or of the same price. And sometimes permanent insurance is more expensive than term insurance for the same coverage amount. In this case, your decision should rather be based on the benefits you’ll get and your needs.

Benefits

Nowadays, insurance companies have started meeting customers’ needs and provide their customers with some benefits while they’re still alive. Some new policies have the option of getting back some or even all of what you paid in case you no longer need life insurance. And other companies provide you with some payments in case you got a chronic illness or need end-of-life care. Searching for companies that offer these benefits is a good choice, especially if you’re not sure whether you want a term policy or a permanent one.

Affordability

The amount of coverage shouldn’t be way more than what you need. After you’ve calculated your expenses and how much your family will need after you’re gone, it’s better to choose a plan that slightly exceeds that amount. This could cut down costs while having all the life insurance benefits.

You should consider how much you can afford. It’s great to think of your family’s insurance after your death, but you should also consider whether you’ll be able to afford it or not. The amount you can afford to pay will indicate how much you’ll invest in life insurance and the benefits you’ll get.

Know the claim settlement ratio of the company 

You’ve done your research and found the most suitable insurance company that matches your needs. Now, it’s time to find out the claim settlement ratio of this company. This process will only take a few minutes, but it will tell you a lot about the company. Do some online research to find the claims history of this insurance company and check its ratio. The ratio you’ll find is the claims settled by the company compared to all the claims it received.

The higher the ratio, the better. However, if you found a company with many rejected claims and whose ratio is relatively low, you should check the reason behind the rejection. You will find many sites that provide you with an insurance companies’ claims history, so this step will be quick and easy and will tell you a lot about the company. 

There are many insurance companies out there, but not all of them will have plans suitable for your needs. That could make your decision-making process longer and harder. However, when you answer all the questions and consider the factors mentioned, you’ll be narrowing down your options and you’ll know exactly what you’re looking for. If you’re still in doubt after doing all that, talking to a trusted advisor could be the best solution. Someone who understands the market and everything about life insurance will help you make your decision.