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Buying Life Insurance 101

Blog pic So you’ve graduated from college, landed your first grown-up job and married the love of your life. Life couldn’t be better, so why ruin it with morbid thoughts about mortality?

As unpleasant as the idea of planning for your own death might seem, there are plenty of reasons to look into buying life insurance. If you (or your spouse) are the main source of income for your family, have or are planning to have children and currently share a substantial amount of debt and/or a mortgage payment, life insurance will be a good cushion to put into place sooner rather than later.

As you grow older and your life continues to change, you’ll want to start thinking about purchasing a life insurance policy. But all these changes can be a little (or a lot) overwhelming, so we’ve done some research for you and put together a short list of basic do’s and don’ts  when purchasing life insurance.

There are two types of policies, term and permanent. Term insurance provides death protection for a stated time period, or term. It provides a death benefit if you die within a set number of years and typically nothing if you live beyond that term. Permanent insurance, otherwise known as whole life insurance, provides life insurance coverage for as long as you live.

According to consumer reports, permanent policies can cost at least 10 times more than term policies. A $1 million policy for a middle age male for instance might cost an average of $160 a month for a term policy. If however you’re looking into the same amount of coverage on a whole life policy, you’re looking at a monthly premium of approximately $750 a month. Keep in mind however that the premium is fixed on a whole life policy and you’ll be able to borrow against it should the need arise.

According to Forbes, some insurance agents recommend coverage that will replace the equivalent of 15 times your annual income.

In order to help you decide which type of insurance you should opt for, take advantage of online calculators. The goal is to figure out how much money will be needed to cover your spouse’s expenses until retirement as well as support your children through adulthood.

After you’ve decided how much insurance you’ll need and which policy best fits those needs, it’s time to get yourself into shape. There are several life improvement changes you can make today in order to reduce the cost of your monthly premium. For example, kick the smoking habit once and for all, work towards loosing weight and lowering your cholesterol and blood pressure.

Lastly, do your homework! Whichever type of policy you decide to purchase, it should be done through an insurance company with an “A” rating or higher from an independent rating agency. Also, make sure to compare quotes from different companies.

But don’t just take our word for it. Remember to consult a professional before making your purchase if you’re still unsure about your choices. Setting a plan into place for your loved ones will give you peace of mind knowing that they will be taken care of once you’ve passed away.