How to Shop for Life Insurance

Mother and daughter shopping onlineThirty percent of U.S. households have no life insurance, according to a 2013 study by the Life Insurance and Market Research Association. Yet more than half of U.S. households reported that they needed more life insurance. So why don’t more families buy insurance?

Some parents may be put off by the thought of adding another cost to their monthly expenses, or by the confusing terminology used in insurance quotes and contracts.

However, the real question isn’t whether families such as yours can afford to buy life insurance, but rather, can you afford not to?

Whether you, your spouse or both of you are the breadwinners in your family, your children rely on that income. Life insurance provides a safety net for your family should something happen to you.

How do you choose the best life insurance plan? By shopping wisely:

1. Do the math. To determine how much insurance coverage you would need, figure out what your spouse and family would need financially if you were no longer here. Think about your lost income and any outstanding debt you may have, such as a mortgage, car payment, or school loan. Also consider how many years into the future your income would need to be replaced. Our life insurance tool can help you determine what type of policy and how much coverage you may need, depending on your unique situation.

2. Decide how long you’ll need insurance. There are two main types of insurance: whole life1 and term life2. The main difference between the two is that term life insurance is for a set period of time and costs less than whole life, whereas whole life insurance is coverage for exactly that – your whole life. Unlike term life, whole life insurance builds cash value over time for as long as you own the policy, giving you a source of ready cash should you need to borrow against you policy.

Whether whole life or term life insurance is right for you will depend on your age, how many people depend on you financially, and how much you can afford to pay in premiums per month. Sometimes term life insurance is the more affordable option, depending on the policy.

3.  Shop around. All insurance policies are not created equal. Make sure to look at the features and benefits of each policy, not just the price tag. It’s always good to get premium rate quotes from at least three insurance providers before making your decision.

Additionally, don’t take insurance quotes at surface value. Research the insurance provider behind the policy to make sure that the company has a sound reputation and isn’t just a fly-by-night company.

You can also turn to customer reviews to see what people are saying about the provider. Although a couple of bad reviews aren’t cause for concern, nothing but bad reviews might be.

1 Policy Form Series SWLP-13, Policy Form ICC13-SWLP
Policy Form ICC13-HWLP, Policy Form Series HWLP-13

2 Policy Form Series SLT-05
Policy Form ICC11-LTL, Policy Form Series LTL-11

Sources:
1) http://www.limra.com/uploadedFiles/limracom/Posts/PR/LIAM/PDF/Facts-Life-2013.pdf
2) http://www.forbes.com/2010/12/16/life-insurance-shopping-personal-finance-term-permanent_slide_8.html
3) http://www.marketwatch.com/story/how-to-buy-a-life-insurance-policy-1304837548050

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