With so many similar policies from which to choose, the process of shopping for life insurance can be overwhelming. It also tends to be highly personal. To secure the best possible deal for themselves and their beneficiaries, the savvy life insurance shopper carefully considers his or her family’s needs and purchases protection accordingly. First-time buyers should keep several things in mind when searching for coverage.
Do You Need Term Life or Whole Life Insurance?
First, there are two major varieties of life insurance: term life and whole life. As their names suggest, the former covers policyholders for a predetermined period of time while the latter remains in force indefinitely. Since they often expire without paying out benefits, term life policies tend to be far cheaper than whole life products. On the other hand, whole life policies have cash values that steadily increase over time and may be accessed in part or in full after a grace period. Keep in mind, you can convert your term life insurance policy into a permanent one.
Watch out for “Red Flags”
Life insurance shoppers should avoid policies that come with undue restrictions. While most insurers build protections against fraud and accidental death into their policies, some attach additional conditions that may preclude the distribution of death benefits. Policies that don’t cover certain causes of death or have an unusually long initial probationary period should be avoided.
Likewise, insurance shoppers with tight budget constraints should be wary of variable-premium policies. These products can be attractive in the short term, offering lower premiums than their “level term” counterparts for the first five or six years of coverage. This arrangement may be perfectly adequate for customers searching for short-term protection. However, policies that maintain a constant rate over their entire term tend to be more cost-effective in the out-years.
Confused life insurance shoppers have at their disposal an array of in-depth resources designed to explain these products in greater detail. For instance, the National Association of Insurance Commissioners puts out a regularly-updated buying guide for first-time shoppers.
Get Help from a Third Party
A broker can help a shopper make the best decision when it comes time to chose an insurance policy. With so many factors that can affect the cost of the insurance policy, an insurance broker can help tailor your search to your situation.
Meanwhile, many insurance providers offer free online interactive tools known as “life insurance calculators” that determine proper coverage amounts based upon salient circumstances and the individual needs of the insured. Folks wary of allowing an insurer with a vested interest in up-selling coverage to calculate the size of their policy may choose from any number of third-party calculators.