People take the plunge and search for life insurance for multiple reasons. Some financial experts encourage everyone to get life insurance before the age of 35, regardless of what life is like. The Wikipedia definition of life insurance: a contract between the policyholder and insurer in which the insurer will pay a beneficiary a specific amount of money upon the death of the policyholder.
Some people say they don’t know what they’re looking for, so here are 5 things you should look for when taking out a life insurance policy for the first time.
What Can You Afford?
One of the things looked at is affordability. Unfortunately, the more you want to be covered for, the more you’re going to have to pay. The average cost of a life insurance policy is $46.63. Basic premiums are obviously cheaper, as they would be with any insurance policy, and often cover one area of life, such as income replacement.
Affordability will also depend on your career, your health, if you’re genetically predisposed to diseases, and even where you live.
There are a multitude of lenders to look at. Some people compare life insurance lenders to see who covers what for the best price. Prices can vary dramatically across different lenders - something you might find when comparing.
Your Insurance Needs
Taking out life insurance will require the answer to a multitude of questions. It’s the same with the many questions we’re asked when taking out car insurance. How much do you contribute to your family’s income, and how many financially depend on you? Do you have debts that your family will have to pay? Those are the types of questions Google says you’re likely to be asked. An excellent tool to use for assessing your insurance needs is the DIME method — a life insurance pneumonic — used by many reputable brands:
- D for Debt - Mortgages, cars, credit cards, etc.
- I for Income Replacement - Do you want to replace your income for the rest of your family’s lives?
- M for Mortality - Do you have burial wishes to be fulfilled?
- E for Education - Do you have children and wish to fund their education?
Insurance companies only ask so many questions to ensure you get the best policy for your needs.
The Small Print
Experts will always advise you to read the small print, no matter what the policy is for. The small print is where you will find the hidden clauses and the terms and conditions that define your policy. Like with any insurance policy, there are certain conditions and incidences that life insurance policies won’t cover. If you have any questions, you can typically find them in the small print, or most insurers will be able to help you in more detail.
Payout Terms
People are usually interested in the payout terms because they want to know how complicated the process is, and if it’s simple enough for beneficiaries. Typically, insurers pay out within 14-60 days. It’s another thing you might want to look out for when selecting the best policy.
Getting life insurance is a step that most people will take at some point in their lives. Many people feel it is the best decision for peace of mind and financial security for their loved ones. Insurers can talk you through the process and find you the best policy.
The goal of the CompleteMarkets editor is to bring valuable content to the CompleteMarkets members. Providing content to insurance professionals to enhance their sales process, increase revenue streams, understand their clients and provide value to their agency.