Everything You Need to Know Before Purchasing Life Insurance

Misconceptions about life insurance are surprisingly common. People tend to think that life insurance is only necessary for parents with dependents or older adults with health conditions, and cost is routinely overestimated, often by a wide margin. Whether you’re a young and healthy student or a new parent with a mortgage, it is worth understanding what a policy does before buying one. However, it’s important to understand how life insurance works and the coverage options available to you before purchasing a policy. Here are some essential things to know.

What does the application involve?

Knowing what the application asks for makes the process shorter. The answers matter beyond the underwriting decision, because California allows an insurer to examine them for a limited period afterwards. That window is set out in life insurance contestability in California. You will need to answer questions about your driving habits, personal hobbies, family’s health history, and your own medical history. A medical exam will reveal important information that your life insurance company will use to determine your premiums. Typically, this exam involves a verbal interview and a blood sample collection. Underwriters generally use the results to look for risk factors such as blood pressure and cholesterol, along with evidence of nicotine or drug use. Generally, a medical exam that shows you are in good health will help you qualify for better rates.

What else is worth considering?

Life insurance isn’t the only kind of insurance policy that can protect your family and assets when you pass away. Final expense insurance, or burial insurance, can be a blessing to grieving family members juggling numerous emotional and financial decisions in the wake of your death. Final expense insurance is designed to help cover the expenses you leave behind, including your funeral costs, burial fees, and any outstanding debt. Final expense policies vary in how they are underwritten and whether the full benefit is payable from day one, so the graded benefit language is the part to read before comparing prices.

When is the right time to buy?

The best time to buy life insurance is generally earlier rather than later. Age and health are the two largest drivers of what a policy costs, and both tend to move in one direction. Your premiums will be lowest if you buy insurance while you’re young and healthy. Remember that life insurance isn’t just for parents. And while life insurance is vital for people with young dependents, it can also be beneficial for students with loan debt or couples with a mortgage. If you have loved ones who rely on your income or would be burdened with your debt when you die, life insurance is essential.

Which type of policy fits?

There are two main types of life insurance whole and term life. As you may expect, whole life insurance lasts your entire life. It remains in place as long as you continue to pay your premiums and will provide a benefit to your beneficiaries when you die. While this may sound like the best type of life insurance, most people don’t need this level of coverage.
 
Term life insurance, on the other hand, provides coverage for a certain amount of time. Your beneficiaries will receive a payout if you pass away during this period usually between 10 and 30 years. Term life insurance is much more affordable than whole life insurance, which makes it an ideal option for younger people.
 
Rules of thumb circulate here, usually some multiple of annual income. They are a starting point rather than an answer, because they take no account of how long the income needs replacing, what other resources exist, or what the household actually spends. We work through that in how much coverage is enough. A term of 15 to 20 years is often chosen so the coverage runs while children are still dependent on you.
 
No one likes thinking about life insurance. While it’s easy to put it off until you get married, have kids, or reach an older age, there are several good reasons to lock in a policy right now. It’s always better to face these tough decisions sooner than later. Take some time to learn all about life insurance and choose a policy that will meet the needs of you and your family.

Author: Nicole Rubin

The right structure depends on what the money has to do and for how long, which is a different question from what it costs per month. Request a quote and we will size it to the obligation rather than to a premium target.

Disclaimer

This article is provided by Schneiderman Insurance Agency for general informational purposes only. It is not legal, tax, financial, claims, or coverage advice. We are licensed insurance professionals, not attorneys, accountants, or financial advisors, and nothing here should be relied on as a substitute for advice from a qualified professional in those fields. This content is general in nature and is not a review of, or a recommendation for, any individual reader’s specific insurance needs, policies, or circumstances. Insurance coverage depends entirely on the specific terms, conditions, endorsements, exclusions, limits, underwriting eligibility, carrier, and facts of each situation, and the actual policy language always controls. We do not guarantee any coverage, pricing, eligibility, underwriting approval, or claim outcome. Reading this article does not create an agent-client relationship. To understand how these issues apply to your situation, please review your own policy and speak with a licensed insurance professional, and consult legal, tax, or financial advisors where appropriate.