Everything You Need to Know Before Purchasing Life Insurance

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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 80 percent of people think life insurance is more expensive than it really is! Whether you’re a young and healthy student or a new parent with a mortgage, buying life insurance is a smart, affordable decision that will protect the future of your loved ones. 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.

Applying for Life Insurance

To ensure your life insurance application process goes well, make sure you know what to expect. 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. According to Haven Life, your life insurance company will use the blood test to look for health risk factors like high blood pressure and high cholesterol as well as evidence of nicotine or drug use. Generally, a medical exam that shows you are in good health will help you qualify for better rates.

Other Insurance Policies to Consider

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. If you’re considering final expense insurance, be sure to shop around for quotes from different companies to find an affordable policy that will provide the coverage you need.

Knowing the Right Time to Buy

The best time to buy life insurance is right now. According to Investopedia, it’s a good idea to buy life insurance while you’re under the age of 35 because the cost of your policy will increase with every year you wait. 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.

Choosing a Life Insurance Type

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.
 
When deciding how much life insurance you need, Dave Ramsey recommends coverage equal to 10 to 12 times your annual salary. This should be enough to support your family in your absence and provide some additional funds to invest for the future. A term policy between 15 and 20 years ensures your children are covered for as long as they 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