Purchasing Life Insurance

Purchasing life insurance can seem complex, but it’s an important part of creating financial security for your family. It’s a contract between an insurer and a policyholder that provides a lump sum of money to designated beneficiaries after the death of the insured.

The death benefit can help your loved ones pay off debts, meet living expenses, and cover funeral costs. Many policies also have a cash value component that can be used to supplement retirement savings. In addition, some types of policies offer living benefits such as waiver of premium, terminal illness and chronic illness coverage.

It’s important to determine how much life insurance you need. To do this, you need to calculate your family’s expenses and current debts. Many calculators recommend a coverage amount that is equal to 10 or 15 times your annual income, but it depends on your unique situation. A financial professional can help you make this calculation and present potential options that best fit your needs.

Once you’ve determined how much coverage you need, the next step is to choose the type of policy that is right for you. A financial professional can explain the differences between different policies, help you understand any possible increases in premiums over time and identify any additional death benefits1 that may be available. They can also present a variety of riders that may be available to help you tailor your policy to meet your specific needs.

When choosing a life insurance company, it’s important to select a reputable, financially stable organization with a good track record. Several independent rating agencies monitor and rate insurance companies. It’s a good idea to review ratings from two or more of these agencies, as each uses a different rating methodology. In addition, you should always carefully read the policy documents to make sure that you understand any exclusions or limitations that may apply.

Once you’ve selected a policy, you will need to complete the underwriting process and pay your first premium. You will be provided with a copy of your policy, which you should keep in a safe place and share with your beneficiaries. If you decide to change your mind about purchasing a policy, most companies will allow you to reinstate it within a grace period. However, the overdue premium will be subject to interest. Contact your agent or insurer for details.