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Life Insurance Buying Decisions

If Life Insurance is not the hardest type of insurance to buy, it's close. First of all, there is no law that says you must have it. Secondly, in order to cash in on a life insurance policy, you have to "cash out". On top of that, the policy features, benefits, and products available make a difficult process that much harder. Here are a couple of considerations when it comes to buying life insurance:

1. Have you decided how much you need?

The rule of thumb is that life insurance should cover four (4) areas.

1. First, and most importantly, it should replace at least a portion of your income.
2. Secondly, If should cover the mortgage.
3. Third comes the children's education costs.
4. Last is emergency expenses and final expenses(funeral, etc.)

Experts have often used a multiple of income analysis to determine how much life insurance a person should need.

How much life insurance is enough? Anywhere between 8 and 14 times your annual salary is recommended. Toward the low end if you have savings and are older, toward the high end if you are younger and/or don't have much in savings. There are life insurance calculators available that can help but most will fall within the above range unless there are unusual circumstances.

2. What kind do you need? Term Insurance or Whole Life Insurance?

The rule here is how long you will need it and how much you can pay for insurance. All the whole life insurance in the world does you no good if you cannot pay for it over a long period of time (10+ years). Term does you no god later in life because the premiums get prohibitively expensive. What is the answer? There is no good answer. It all depends on your situation. Decide how much insurance you need first. Then decide how much money you can afford to part with on a monthly, quarterly, or annual basis. Once you have decided those to things, try to see if you can possibly do a combination of both term and whole life equivalent to the total of insurance you need to cover your family. The exception to this rule is that if you know you will only need insurance for a short period of time. In that case, just get a term insurance policy. The thing to remember is that only roughly 1% of all term insurance policies are ever cashed in. Most people live much longer than they can afford to pay their term insurance premiums.

3. Do I need the additional options that are available?

That depends. It depends on whether or not you can afford them and they are important to you. Things like inflation riders and accidental death benefits are extras you will have to consider. Always get the insurance you need with the dollars you can afford before adding the extras.

Note: There are always other things to consider when purchasing life insurance. A couple of the additional factors to consider are:

• Should you put the insurance in a trust?
• Who will be the contingent beneficiaries?

Make sure you feel comfortable with your insurance professional and confident that he/she can give you the life insurance product(s) you desire AND can afford.

Life insurance quote request form
By completing a quote request, you will be contacted by three life insurance professionals who will be able to advise you and offer a competitive product that suits your needs. The agents are competing and will offer you the best combination coverage and price.