Three Important Steps to Take Before Buying Life Insurance
Have you ever fallen victim to the pushy life insurance salesperson? You know, the one who calls three times a day and will not take no for an answer. The one who just happens to randomly “be in the neighborhood,” and stops by your home or office. The one who knows what is best for you, whether you know it or not. Often times, providing rebuttals to anything you say until you have no will left to fight. Eventually breaking down your resistance until you finally buy a policy in hopes he or she will disappear. Well, you are not alone. Many people are susceptible to these tactics, which is why they still exist today.
Unfortunately, these predatory tactics are very common throughout the life insurance industry. Whether it is pride or the hassle of cancelling people often keep the policy, even when purchased under these conditions. That is, they keep it long enough for the company to claim a portion of their hard earned money. Companies understand this and some even operate by preying solely on this group. Do not fall victim to these predatory practices. It is time to take the power back. Below are three steps to take before purchasing life insurance to ensure you have complete control over the process.
1.) Identify Your Need For Life Insurance
Life Insurance is not a one-size-fits-all product. People purchase life insurance for many different reasons. As a result, insurers created specialized products to match the unique needs of their clientele. Therefore, it is important to identify your individual risks, or in other words, your need for life insurance. Why are you buying life insurance? What are you trying to accomplish with it? Are you buying life insurance because a family member told you to? Do you need a policy to protect the loss of a breadwinner’s income? Do you want to cover your debt and secure your assets? Are you attempting to build a nest egg? Do you want your child to have a head start in life, or an easier time paying for college? Is your goal to leave behind a legacy? Or, is it simply to cover the financial burden of burial expenses?
In any case, it is important to identify the reason you are seeking life insurance. With a clear idea of why you are buying life insurance, it is much easier to find the correct policy. Additionally, given the right information, it is less likely that you will buy an expensive, unnecessary, all-encompassing policy. Or, even worse, a policy that is not beneficial to you or your family. Understanding why you need life insurance increases your confidence and reduces your likelihood of cancelling, or losing your investment. More important is the peace of mind knowing that your policy will accomplish exactly as you intend it to.
2.) Choose a Life Insurance Product
Once you have identified why you need life insurance, choose the product that best fits your needs. There are many products out there, but most companies offer a variation of three types: Term, Whole, and Universal Life. The first, and easiest to understand is Term Life Insurance. Term Life Insurance provides coverage for a given period of time, ranging anywhere from 1 to 30 years. People typically use Term Life Insurance to protect assets during peak earning years. It offers an affordable way to secure major assets, like your home, while you pay it off. Additionally, if a parent passes away prematurely, Term Life Insurance will guarantee their children can afford a proper education. If you outlive your term, you generally lose your investment. Although, some companies offer ways to recoup your money through return-of-premium riders.
The other two products, Whole Life and Universal Life offer life-time coverage. As long as the client continues to pay the premium, the policy will remain in place. Whole Life and Universal Life Insurance both build cash value. Whole Life Insurance builds cash value at a guaranteed rate, whereas, Universal Life Insurance uses market rates. Generally, people use Whole Life Insurance to cover funeral expenses. Additionally, Whole Life Insurance is a great way to transfer wealth tax free. Once in place, the policy’s premiums never increase. In contrast, Universal Life Insurance premiums do increase as the product ages. Although, clients typically surrender the policy for the cash value before premiums are no longer affordable. This makes it a great instrument to protect assets during accumulation years, as well as build cash that is available in the golden years (see products for more detail).
3.) Find a Local Independent Life Insurance Agent
As the buyer, you have the power to select who you want to work with. Life insurance is a long-term commitment and choosing the wrong policy, agent, or insurer can create a life-time of regrets. So, how do you know which agent is right for you? Before choosing your agent you should consider a few key points. First, is the agent easy to reach? Is he or she captive, serving the needs of a single company, or non-captive, serving the needs of the client? What companies does he or she have access to? What are the financial ratings of those companies? Does he or she expect to be an agent for a long time? Or, is it a short-term position? These are all important questions to ask before making your decision to work with an agent.
The final step is to find a genuine, trustworthy, and local independent life insurance agent. By working with an independent agency you will receive client-focused, third-party advice. Thus, giving you more confidence and control over the sales process (see 3 Reasons You Need an Independent Insurance Advisor). Also, you may qualify for additional services through your independent agency that are not available by working with a single insurer. If you choose an independent agent with access to multiple insurers, you will get the opportunity to shop around. Providing a better experience and a greater chance at buying a policy that fits the exact needs of you and your family. An independent agent can offer the expert advice you are looking for without having a contractual bias towards a single company. Ultimately, equating in the best environment for the buyer and resulting in a transparent and honest transaction.
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The easiest way to protect yourself is to be patient and not purchase the first, or cheapest, product you find. Remember, it is the need, not the price, that is most important when determining the right policy. Therefore, carefully consider you and your family’s financial goals to help identify your need for life insurance. Then, pick the type of life insurance product that will protect your most vulnerable areas. Last, find a reliable independent insurance advisor with access to multiple insurers for professional support throughout the purchasing process.
Furthermore, buying life insurance is a positive experience that one should look forward to. A person should feel proud knowing he or she is protecting his or her family’s financial future. Life insurance can be a powerful tool and many use it to protect their most valuable assets. It is one of the best ways to guarantee your legacy will last for generations to come. By following the three steps outlined in this article you will have a better experience and a higher chance at buying a policy that you actually need. With the right education you will be less likely to fall prey to the predatory practices that are prevalent throughout the industry.
