Consider These 10 Tips Before Buying Life Insurance

Tips to before Buying Life Insurance

According to a recent survey of LIMRA and Life Happens; most of the US people forgo life insurance due to the confusion regarding how much and which type of life insurance to buy. According to the 2021 Insurance Barometer Survey, COVID-19 pandemic led 31% of the US population to buy life insurance due to life threatening global situations.

Due to rising awareness, people all over the world are buying life insurance and understand its importance. Life insurance is more important than your auto insurance or property insurance. Although before buying the right fit for yourself; it is better to read the 10 tips for buying life insurance:

  1. Honestly asses your actual financial capacity
  2. Calculate exactly how much life insurance coverage do you need
  3. Choose the most suitable life insurance policy for yourself
  4. Identify the factors that affect your life insurance rates
  5. Compare all companies and go for best features on least rates
  6. Policy cost and premium amount is not the only deciding factor
  7. Be prepared for loads of questions
  8. Fill the application with 100% honesty
  9. Do not go for a painful process
  10. Lock in the temporary coverage right away!


What to look for when buying life insurance?

1. Honestly asses your actual Financial Capacity

Here is the first tip for buying life insurance. You have to make sure that you calculate all your current assets net worth accurately. These assets are your real estate, your property, your savings account, your retirement fund account, your pension amount, your other insurance’s worth.

Also Read: Top 10 Senior Life Insurance Companies in 2023

It is advisable to find some financial expert who works as an independent insurance agent from NAPFA, National Association of Personal Financial Advisors. Consult his professional advice to evaluate the actual worth of all your current assets.

2. Calculate exactly how much life insurance coverage do you need

Many websites of reputed insurer firms offer online life insurance calculators. They show an estimate of how much monthly premium you might be charged. The actual application process requires a lot of data and it is a time taking thorough process.

There are 3 general formulae:

  • Multiply your current annual income by 10, for ten years’ coverage.
  • Multiply your annual income by 30 for 30 years’ coverage and add $100,000 for the college expense of 1 child.
  • DIME debt, income, mortgage, education. Add up all 4 expenses and you get the life insurance coverage you need.

Note: However, reassess your actual coverage needs by subtracting the asset worth from the total sum up. Again consult the independent broker’s professional advice for a final conclusion!

3. Choose the most suitable life insurance policy for yourself

Broadly categorized; life insurance has two types: term life and permanent whole life. Term life as the name shows, is a temporary arrangement for a 10-30 year range. It offers steady and affordable monthly premiums. It will cover you only till the term expires. If you outlive your term insurance; you do not get any death benefit.

Permanent universal or whole life insurances are both everlasting. Both offer a cash value component with steady growth over a lifetime. Both have very expensive premiums every month. The two differ because universal life has adjustable premiums while whole life has fixed premiums. Whole life insurance policy is the most reliable life insurance form. But it is suited for people who are on a lavish budget.

4. Identify the factors that affect your life insurance rates

Identify and fully understand the features that make a huge impact on the cost of your premiums and overall cost of life insurance. Your age and your health are the deciding factors. Younger a policyholder is, less the cost of life insurance and premiums for him.

Similarly, the healthier a person is, the lower the premium price and overall life insurance policy price. The type of policy also affects the rates, obviously the bigger the coverage, the higher the premiums. If your policy is temporary, you will incur lower costs.

The best recommendation for the younger lot is to buy a term life policy for 30 years from the reputed firms. After it expires, convert it to a permanent whole life insurance policy. You will be able to save a lot at a younger age from premiums. And in the last 15-20 years of your life you convert to whole life and get a cash value component.

5. Compare all companies and go for best features on least rates

Compare with an independent broker and use the data from Veralytic, J.D. Powers, A.M. Ratings, NAIC to make an informed decision. Insure Guardian Top picks are:

  •     Mutual of Omaha
  •     Protective
  •     Pacific Life
  •     Foresters Financial
  •     Northwestern Mutual

6. Policy cost and premium amount is not the only deciding factor

It makes sense that your biggest concern is the monthly premium amount. When you choose any company and its policy; you must make sure that you can make the premiums forever. But it isn’t the only deciding factor.

While you look for the right life insurance policy, consult with the independent agent to make the final decision. You must check the financial stability of the insurer agency through the A.M. Best ratings so that they can pay you the death benefit down the road.

Similarly, the false exaggerated policy illustrations for guaranteed vs, non-guaranteed parts of an IUL Indexed Universal Policy can mislead you. Search thoroughly with professional consultation!

7. Be prepared for Loads of Questions

Have the patience and be mentally prepared to answer a whole bunch of questions during the application process. These questions include your height, weight, your medical history, family medical history, your mental health, your tobacco usage, details of any disease you might have, your prescription drugs list and many more!

Likewise, the firm might ask you about your driving record, DUI’s record, alcohol usage patterns, smoking habits, high-risk jobs, high-risk habits, high-risk hobbies and many others to assess the rate they should charge you for your life insurance.

8. Fill the application with 100% Honesty

Always answer the queries with absolute honesty. The insurance firms double check and verify all your answers through third-party firms. They will retrieve your medical records, bank statements, prescription drugs records, driving report records and all other public records. You might have to undergo a medical exam by giving your blood and urine sample too.

9. Do not go for a Painful Process

Although there are many life insurance types which do not require you to go through any painful application process. You might not have to undergo a medical exam or even answer the health queries for a Guaranteed Issue life insurance policy. Accelerated underwriting policy helps you to speed up the process because the insurer firm collects the data themselves from third-party.

Simplified Issue allows you to opt without a medical exam. But the premiums for guaranteed issue and simplified issue policies are usually very high.

10. Lock in the temporary coverage Right Away!

While submitting your life insurance application, attach a monthly premium payment check with the application with the consent of your independent broker. This might help you keep covered a bit before the application goes through a 3-6 weeks’ long underwriting approval process.