Buying Life Insurance 101: Discovering the Best Life Insurance Policy for You, Beyond What You See on TV
There are many things to consider when thinking about how and where to buy a life insurance policy. How much coverage you will need? When to buy? What term and what type of policy? It can seem overwhelming when you are just beginning to gather the information you’ll need to make your decision. Here are some important things you should know as you begin your life insurance purchasing process.
10 Things to Know About Buying Life Insurance
1. There are essentially two types of policies.
You can consider purchasing a term policy, otherwise known as pure insurance coverage, or you can go with one of many types of whole-life policies, which combine an investment product with a pure term life insurance policy to build cash value. You will need to determine which of the two is right for you.
2. Insurance is something that is sold, not something that is bought.
Agents sell the vast majority of life insurance policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies. Consider what’s in it for you, not your agent, when you’re looking at which policy to purchase.
3. Whole life policies can be more expensive.
A whole life insurance policy that has an investment component added in can cost many times more than a simple term policy. The risk with this is that many people who purchase these types of policies often buy less coverage than what they need because of the cost. This can leave them underinsured.
4. Whole-life policies are built on assumptions.
Agents have to base the returns they quote you on guesses, not reality. In order to attract buyers, these guesses can err on the higher side. Remember that the quotes with whole life policies are not a guarantee of return.
5. You should keep your investing and insurance separate.
There are many other places to invest your money that will not cost you the high commission prices of whole-life policies. You are better off focusing on a term policy and exploring completely separate ways of investing other income.
6. Make sure you purchase enough coverage to suit your needs in the future.
Because low rates make life insurance very affordable, this is not the time to skimp on coverage. Assess how much you will need, and don’t short change yourself.
7. Consider what the term of the policy should be.
Your policy should be sure to cover your dependents when they need it most — before they are on their own. Also consider when your retirement will be kicking in before you determine your term.
8. Buy when you are healthy.
An older person or one who’s not in the best health will pay much higher rates than someone younger or in good health. Buy your policy as early as you can, but it’s not necessary to buy until after you have dependents.
9. Be honest.
Lying on your application to try to get a lower rate is not a good idea. If a large claim is made, the insurance company will surely investigate the facts before paying. Better to be up front than to risk having surprises discovered when it’s too late.
10. The internet is your friend.
Buying life insurance online couldn’t be easier, or faster. You can shop anytime and review dozens of life insurance quotes and polices, all while avoiding the pressure of pushy salespeople.
Four Reasons People Buy Life Insurance
What turns a life insurance shopper into a life insurance buyer? In today’s blog post, we focus on the top four reasons people go from shopping for life insurance to purchasing a policy for their family.
Let’s start with shopping process. Perhaps our readers can identify with one of these top reasons why people shop for life insurance.
- 41% of life insurance shoppers said life events (getting married, having or adopting a child, or buying a home) prompted them to shop for life insurance.
- A quarter of life insurance shoppers considered life insurance because their financial advisor or sales rep initiated contact or suggested the need for life insurance.
- 25% of life insurance shoppers looked at buying life insurance because they thought they might need more and wanted to review their coverage.
- One in eight life insurance shoppers said a friend or family member recommended a sales rep or financial advisor, prompting them to shop for life insurance.
So, what turns a life insurance shopper into a buyer? These top four reasons are why people decide to purchase life insurance.
- 78% of shoppers with previous relationships with their sales rep bought life insurance – almost 10 percentage points higher than shoppers who had no prior relationship with their sales rep.
- Providing a needs-based analysis to customers helps them understand how life insurance can work for them and their families. Three-quarters of shoppers who received a needs analysis bought life insurance, compared with less than half of those who didn’t have a needs analysis.
- Shoppers more likely to buy life insurance — and larger policies — after getting a recommendation from their sales rep.
- 35% of non-buyers said they were still shopping and the sales reps should have followed up with them; one-third were still making a decision.
Finding a reputable and honest life insurance agent can be hard. At True Blue Life Insurance, we are focused on providing the best life insurance quotes for our customers. We don’t believe that purchasing life insurance should be a high-pressure process.
Checklist for Buying Life Insurance
A good agent will ask you about the following information when assessing your need for life insurance:
- Financial situation
What level of daily expenses are you currently comfortable with? This makes a huge difference in how much money your life insurance policy should provide in the event of a payout.
- Long-term goals
Do you want to gather wealth through your life insurance policy, or do you have other retirement methods for the long term? This is a major factor between permanent life insurance and term life insurance policies.
Do you currently have children? If so, how many? Ultimately, your dependents are the beneficiaries of your life insurance. If your children are grown, then it might be your spouse. Or, perhaps the payout will be used to help cover your burial expenses.
There are many more questions that a life insurance agent will ask you, but these are three basic points that make a big difference in the type and volume of life insurance you purchase.
Preparing for Your Life Insurance Medical Exam
After you’ve applied for a life insurance policy that requires a medical exam, you’ll be asked to schedule the exam. This medical exam can make a difference in your monthly premium, so you’ll want to do everything you can to make sure the exam comes out as good as possible.
First of all, please know that there is no way to change your entire medical history or improve your health in just a few weeks. We do not condone partaking in any risky miracle diets or trying some crazy herbal remedies in an effort to improve your medical exam. Instead, we’ve put together a short list of tips that can keep your medical exam from showing poor results that are not warranted. A nervous mind can cause increased blood pressure and affect your vitals in negative ways. So, use these tips to keep yourself from bombing the medical exam.
- Don’t lie to the medical examiner. If you lie, it could result in the loss of your policy, even after years of paying the premiums!
- Do the medical exam in your own home. This will help limit the amount of stress you experience because you’ll be more comfortable at home.
- Wear a short-sleeved garment. This will make rolling up your sleeves much easier when the examiner needs to take your blood pressure.
- Avoid tobacco and alcohol. We’d really like for you not to smoke or drink at all, but we know that some people will. So, please try to avoid these for a least a few days before the exam.
- Schedule the exam for in the morning. We say this because it’s likely that you will have to fast for 8 hours before the exam.
- Avoid taking the exam during the holidays. The holiday seasons can be stressful for some people, and an eating binge can have a negative effect on your blood pressure readings.
The Best Way to Buy Life Insurance
To many people, the process of buying life insurance may seem like a daunting task. However, once you understand the basics of life insurance and understand your own personal goals, the process becomes simpler. Here are some key things to keep in mind:
- If an agent is pushing a policy on you, walk away. Honest agents make recommendations and allow you to make the choice. Unethical agents try to guilt you and push you into a policy they think is best.
- Determine the long-term strategy. Are you looking to “own” a life insurance policy (permanent) and use it as an asset? Or, are you looking to “rent” a life insurance policy (term) and invest money in other areas?
- Stick with what you can afford. Most insurance polices either lapse or are surrendered because people don’t keep up with the payments. Choose a policy you can afford right now and down the road. You can always buy more life insurance later, if needed.
- If you don’t want to take a medical exam, apply for a no-exam life insurance policy. It may cost slightly more, but you don’t have to deal with the hassle of physicals and blood draws.
- Always use independent agents. Independent agents represent numerous companies and can find the policy that best suits your needs, unlike some “branded” insurance agents, who only sell one company’s product and often have high quotas to meet. Going independent helps you make a better choice all around.
Buying life insurance doesn’t have to be hard. With the advances in technology, you don’t even have to talk more than 10 minutes with an agent. And, in some cases, policies can be issued instantly. The best way to prevent confusion and ensure transparency is to be informed first and discuss life insurance options with someone you trust.