What to Know Before Buying a Life Insurance Policy
Buying a life insurance policy is an important decision.
According to LIMRA's 2023 Insurance Barometer study, only about half (52%) of individuals report they have life insurance coverage, either through their place of employment or their own policy. And only 59% of parents report having life insurance, which could leave their dependents and loved ones in serious financial trouble if they pass away.
Source: Forbes - Life Insurance Statistics
One reason so many put off buying a policy is that choosing the right life insurance policy can feel overwhelming; there are countless policy options, terms, and fine print, leaving many individuals unsure of where to start. But the truth is, life insurance isn't just about numbers; it's about protecting the people you care for and making sure they are taken care of no matter what.
So before you sign for a life insurance policy, it's worth taking a step back to understand what really matters when choosing a policy.
At Twin City Underwriters, we are a family-owned insurance agency that has been helping individuals with their most critical insurance decisions for over 50 years. In this article, we will break down the key things you should know before buying life insurance so you can feel confident about your decision.
Before You Buy Life Insurance: Factors That Matter Most
Unfortunately, many people buy life insurance without fully understanding what they're getting. Here are several factors to consider when buying a life insurance policy.
Coverage Needs
Life insurance is one of those things that just isn't one size fits all. The right amount of coverage depends on your unique situation and should be based on things like your income, debts, family size and your long-term financial goals.
Learn More: How Much Life Insurance Do I Need?
Take into consideration what you would intend for your life insurance policy to cover in the event of your passing; some common goals would be to pay off a mortgage, replace an income, cover children's college costs or simply to ease the financial burdens of your loved ones. Or perhaps you'd like a life insurance policy designed to leave a tax-free inheritance or a lasting financial legacy for your family.
Getting clear on your needs up front will help you avoid being either underinsured or paying for more coverage than you actually need.
Read More: 5 Reasons to Buy Life Insurance
Policy Options
Before buying a life insurance policy, it's good to understand that there are several different types to choose from. Not having a basic understanding can make it that much more confusing when comparing options and deciding what's best for you and your family.
The two main types of life insurance you will hear about are term life and whole life.
Term life is usually the more affordable option of the two, and it covers you for a set number of years, like 10, 20, or 30 years, which are common timeframes. Term life insurance only pays out the benefit if you pass away during the designated time.
Whole life insurance, on the other hand, lasts your entire lifetime and can also build cash value that you can use while you're alive.
Beyond these two types of life insurance, there are other variations like universal life or variable life that may be suitable for some individuals. The key is to understand how each type works so you can match the policy to your goals and budget.
Learn more about the different types of life insurance policies: Understanding the Different Types of Life Insurance
Cost Considerations
The longer you wait to purchase life insurance, the more you'll typically pay for the same amount of coverage. It's an important detail to remember if you've been putting off getting coverage.
When purchasing a life insurance policy, it's essential to consider the factors that can influence your costs and premiums. One of these factors is riders or add-ons, which can provide significant benefits in different situations. For instance, life insurance riders can help account for inflation, cover long-term care expenses, or provide a partial payout benefit in the event of a chronic illness.
Interested in life insurance but not sure where to start?
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Insurer Reputation
One factor that’s easy to overlook is the reputation and reliability of the company you purchase your life insurance policy from. With something like insurance, it’s natural to assume the coverage and support will be there when you need them. And while that’s often true, life insurance companies aren’t all the same, which is why choosing one with a solid track record really matters.
To get a clearer picture of a life insurance company's reputation, you can check ratings from independent sources like AM Best before making a decision.
Professional Guidance
Anyone can purchase life insurance directly from a life insurance company; now, you can even purchase a policy on your own online without talking to someone. This is a convenient option for some; however, others like to have a meaningful discussion with an advisor to understand all of their options and make sure they are getting the best coverage at the most affordable price. This is where working with a life insurance broker, such as the team at Twin City Underwriters, is so valuable.
A life insurance broker represents multiple different insurance companies and can compare and offer many different options, rather than being limited to one company. This can be especially beneficial as you look for coverage that fits your needs, budget, and long-term goals.
Get Life Insurance Guidance From Twin City Underwriters
When it comes to choosing a life insurance policy, it can be hard to know if you're making the right choice. At Twin City Underwriters, we believe that insurance goes beyond paperwork; it’s about understanding our clients at a personal level to make the most suitable insurance recommendations.
Our team of experienced life insurance agents at Twin City Underwriters are able to help you compare life insurance options and tailor your coverage to fit your specific needs.
Reach out to our team today to find out more about the right life insurance plan for you.
Are you ready to have a meaningful discussion about your financial needs? Call or email TCU today to set up a free, no-obligation appointment with one of our dedicated agents.
Choosing a life insurance plan can be difficult. Working with an insurance broker can help you find a plan that fits your needs. Schedule a one-on-one meeting with one of our life insurance brokers to get your insurance questions answered!