Life Insurance Facts: Things Every First-Time Policy Buyer Should Know
Whether you're thinking about protecting your dependents or you're just branching into adulthood and you want to make sure that your parents aren't left footing the bill for a memorial service if something should happen, life insurance is an important investment. Before you buy a policy, though, it's important that you understand what you're buying. Here are a few facts that every first-time life insurance buyer should know.
There are Two Primary Policy Types
Life insurance policies fall under one of two styles, though there are many variations of each one. Term policies provide you coverage for a defined time period. Whole life insurance is an investment-based policy that builds cash value in addition to offering the core life insurance benefit.
Whole Life Has Higher Premiums
Since a whole life policy offers long-term coverage and the benefit of building cash value, the premiums are higher. You'll need to weigh out the cost of the policy against how much face value you need on your policy. Don't sacrifice your benefit payout to reduce your premiums. If affordability is a concern, consider a term policy initially.
Make Sure You're Sufficiently Insured
You buy life insurance to make sure that your financial needs are covered in the event of your death. Not only does it provide your loved ones with a way to pay for your services, but life insurance is also an opportunity to cover any debts you estimate will still be owed at the time of your death.
Also consider how much money you want to leave for your loved ones to rely on during their mourning. Especially if you're the primary earner in your household, you'll want to be sure that your loved ones can pay the bills and take time to heal. If you're a single, young adult, you may not have dependents to be concerned with. You should, however, think about your student loans and other similar expenses.
Consider the Term of Your Policy Carefully
When you buy a life insurance policy, make sure that it's going to last for as long as you have dependents in the house, or until other benefits will take effect. Think objectively about how long you'll need this protection when you choose your policy term. If you're young, you'll want to select a longer term policy to ensure that you have the coverage in case you need it.
Despite its importance and value, life insurance is often overlooked. When it does come time to buy, many first-time policy buyers are unfamiliar with how the policies work and the terminology associated with it. With the information presented here, you can reach out to your state farm agent with a core understanding of what you need to consider as you make your policy choice.