Help with Purchasing Life Insurance

There are many important factors to consider when purchasing life insurance. The Washington Insurance Commissioner, Mike Kreidler, offers advice to help you determine what type of insurance to choose and other pertinent information, in his article, “Tips on Buying Life Insurance.”

Kreidler states that these 8 helpful tips will apply to those in the market for life insurance.

1. Know what you need: The best and most obvious reason for purchasing life insurance is for protection after your death. The finances your family or loved ones will receive in the event of your death can be used for burial costs, taxes, loans or personal reasons. Kreidler urges people to beware of companies that claim life insurance is an “investment.” Life insurance should be used for the protection it will provide.
   
2. Term life insurance: With term life insurance, “you pay each year for the cost of insurance, which typically increases annually as your chances of being alive the next year decline. Most term policies are renewable on an annual basis, and some have level premiums or a decreasing death benefit for a stated period -- one, five or ten years, or even to a specified age.” You do not build up any cash value or equity through term life insurance.
   
3. Whole life insurance: Whole or “ordinary” life insurance is usually sold with a flat premium. The annual premium will be higher than term policies in the beginning years of coverage. But since whole premiums are flat, there is a good chance that the premiums will eventually be lower than term insurance premiums. “Whole life policies build up a cash value that consumers can withdraw or borrow against.”
   
4. Know the company you are buying from: You should check the financial stability and past records of the life insurance company you are thinking of working with. These records can be found at the public library or the Internet. A rating system is also usually offered to help you decide the value of the company.
   
5. Shop around for rates: Life insurance is a highly competitive marketplace. Shop around for the best possible rates.
   
6. Shop for your own needs: “If term insurance fits, that's what you should shop for. If you want to lower your premium at all costs, you may want to consider using a direct writer — a company that cuts costs by operating without agents. Consider your own convenience, however: Do you want personal contact with an agent? Or if you buy an annuity, how fast can you get to your money in case of an emergency? If you are buying whole life, how fast does your money accumulate? What will the cash value be in one year? Three years? Ten years?”
   
7. Update your coverage as your circumstances change: Review your net worth very few years to determine if your family or loved ones will need additional coverage once you die. Are taxes or mortgage rates higher?
   
8. Never buy a policy you don’t understand: Always save pamphlets or copies of material you receive. Make sure you understand the guarantees and surrender policies. If your agent can not clearly explain the contract (everything within it) in detail, shop elsewhere.

Remember, these are just steps to help you make decisions about life insurance. Take your time to find the best policy and company that caters to your specific needs.

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