How to buy Life Insurance

The reasons to buy life insurance is to provide money or replace the income lost to your family upon your death. Life insurance death benefit also pays off debts and expenses, provides money to charity or organizations and covers final and estate expenses.

Term or Cash Value
The two basic types of life insurance are term life insurance, and whole life (permanent or cash value) insurance.

Term life insurance:
This provides life insurance coverage for a specified period of time; also offers protection for the smallest price and most of them are renewable, ie. you can purchase term life insurance again for the same term even if your health or circumstances have changed, although the premium may increase on renewal. Some policies are called "convertible" which permits you to convert the policy to a permanent one.
With term life insurance, you protect you family's financial future for a smaller premium payment

Whole life insurance: This combines a death benefit with a cash value component and acts more like investments, ie., their ultimate value depends in part on the performance of their stocks and bonds. These generally have much higher premiums, especially initially, but unlike term insurance, it can also be used as an investment and retirement vehicle. For a higher premium, this gives you financial protection now and savings for the future.

Choose a Coverage Amount?
When you decide to buy the amount of life insurance protection, think how much income your survivors will need and how much you own and owe, and the amount of other life insurance available to you. For more information, read our articles:

What Term?
Consider choosing a term that matches your need for life insurance protection. Different types of term life insurance will have different premiums. Level term, the death benefit stays the same over the course of the policy, and renewable and convertible term life policies will have higher premiums, but may offer the protections you want.

Term life insurance include two additional options, ie. decreasing term and a return of premium feature. Decreasing term is often used on mortgages – which provides a continually decreasing death benefit to buyer although the premium usually stays the same. The return of premium feature allows to recover some of your premium payment if you never make a claim on your life insurance policy.

Premiums:
Depend on many factors pertaining to your age, health, etc. Premiums may change later with some types of life insurance. Understand how and why the premium and benefit payments are calculated, and what is guaranteed. Shop around: Find out what rating the company has received from major ratings services, whether they evaluate an insurer's financial condition and claims-paying ability. Also contact your state's department of insurance to find out more about an insurer's record.

Life Insurance Application:
When submitting the application carefully answer the questions about your current and past health history. You may also require to take a medical exam, arranged and paid for by the insurance company. Once you buy the policy, make sure you understand everything in it. If it doesn't meet your needs, you can always change it during this period than later, without facing any cancellation penalties.