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8 Essential Steps for Purchasing a Life Insurance Policy

Buying life insurance seems like a complex puzzle because it deals with so many different variables. Many people try not to think about what happens after their death, but it’s an important responsibility to plan if you are raising a family. A solid life insurance plan can provide steady income and other benefits for survivors. Here are simple steps on how to find coverage that meets your needs and budget for life insurance.

  1. Determine whether you actually need life insurance – Before you approach a life insurance provider, ask yourself if you really need life insurance. Some people don’t need this insurance if they have plenty of assets and no debt that can be easily divided among survivors. In other cases, adults with no dependents may not need it as well. If you take care of several dependents, the argument grows for you to invest more in a long-term life insurance plan.
  2. Calculate how much life insurance you need – You will need to ask two crucial questions to determine the amount:
    • What type of financial resources will be available after your death to the survivors?
      The resources most commonly available to survivors are Social Security/retirement benefits, group life insurance, and your property or other assets. Try to estimate the degree to which these benefits will be sufficient. For example, if a surviving spouse has dependent children, they will have immediate access to Social Security benefits upon your death. Else they will be able to access it after the age of 60.
    • What financial needs will your survivors have after your death?
      To avoid complexities, try to focus on final expenses, debt, and income requirements. The number of dependents, the ages, and future outlook all play into how much life insurance you need. Answering these questions will give you a clear idea of the amount of life insurance coverage you should purchase. It’s not easy to predict upcoming financial setbacks, but if you assume a certain amount of money will be needed for future emergencies, you will be practicing careful risk management. Your past and current health condition should be a major consideration for future planning. The amount of income you make is another key factor.
  3. Consider other objectives you may have for your life insurance – Some policies cover beyond funeral expenses and other death benefits. Whole life insurance allows the policyholder to build a savings account that grows over time. You can even withdraw money from the account when you need it. This policy lasts the lifetime of the policyholder then delivers benefits to beneficiaries. For single individuals trying to save money, a term life plan might work better.
  4. Determine what type of life insurance best meets your needs – The three broad categories of life insurance are whole life, term life, and universal life. Each of these types of policies has its advantages and disadvantages, depending on your situation. Whole life provides the widest range of benefits but is the most expensive. Term life only lasts for a term of 10-20 years but is the most affordable. Universal life has similar features to whole life, such as savings but doesn’t cost as much.
  5. Find out if you need to add any “riders” to the policy – A basic life insurance policy is where you start, and from there, you can add coverage that fits your needs. These “add ons” or “endorsements” reflect different types of risks you might encounter in your career or your personal life. Each life insurance company creates its own plan and has its own methodology for evaluating risk factors.

    An essential rider to consider is the waiver of premium, which pays you if you become disabled. Another popular rider is guaranteed insurability, which allows you to increase your death benefit without taking a health exam or submitting other medical documents.

  6. Analyze multiple plans – Don’t just sign up with an insurer after a brief Google search on life insurance companies. Remember that there are hundreds of companies to choose from, and no two people have the same coverage needs. Even if you come up with a preferred insurer, you need to compare the prices and features of various coverage plans. That means staying away from the dated paradigm of one-size-fits-all models and seeking a policy that fits with your lifestyle and plans.
  7. Decide whether to pay premiums annually – Most people who buy life insurance find it’s easier to pay annually. The problem with incremental payments is you run the risk of paying additional fees. However, it’s still an option to pay monthly if it’s more convenient to do so. Some people find the annual approach helpful as a reminder to review and update their policy.
  8. Tell your beneficiaries about your life insurance policy – It’s important to let all your beneficiaries know you have named them in your policy. Not doing so might leave a chance that the benefits would go unclaimed if someone is unaware they are named as a beneficiary in your policy.

Once the policy is completed, you should give each beneficiary information on the insurer and where to get a copy of the policy. Then you can sleep better at night knowing that your beneficiaries will have a future path paved for them. It will be a big part of how they remember you as an influence on their lives.

Following the above steps will guide you through the complicated maze of life insurance. The process will be easier once you get answers to your specific questions from seasoned insurance experts. The professionals at Action Insurance Group are ready to provide you with quality service. Tell us about your needs and the types of benefits you want to share with your family.

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