First-Time Life Insurance Buyer? What You Need to Know

What do you need to know about buying life insurance? If this is your first time picking this type of product, take a look at the top tips to make the process easier.

Pick a Policy You Can Afford

This means that you need to choose coverage you can afford right now. Cost is a major reason for not purchasing a policy. Even though you will need to pay for this type of insurance, the idea that it's excessively (or prohibitively) expensive is a myth. According to LIMRA's 2018 Insurance Barometer, 44 percent of millennials believe that life insurance costs five times more than it actually does.

Before you decide to skip coverage entirely due to cost, talk to your insurance agent. They may be able to help you find policies that meet your financial needs right now. If your financial situation changes, you can always reevaluate the coverage later on.

Choose Beneficiaries Wisely

If this is your first time investigating life insurance policies, you may not have given much thought to the specifics. This includes who you'll name as a beneficiary or beneficiaries. In the event of the unthinkable, your life insurance policy can replace your family income contribution, supporting a spouse or children.

But what happens if you aren't married or you don't have children? You have the option of naming anyone of your choosing as the beneficiary. This could include a parent, niece, nephew, sibling, other relative, unmarried partner, or friend. You can also designate the insurance payout as a charitable gift or name your estate as the beneficiary.

Naming your estate as the beneficiary of your life insurance policy means that you need to clearly outline, in a will, your money distribution wishes. Whoever benefits from the policy, whether through the coverage or the estate, will receive the payout. Choose wisely, picking someone who has your best interests in mind.

Determine Coverage Amount

How much coverage do you really need? While you don't need an exact, down-to-the-penny figure, buying your first life insurance policy does require a ballpark figure. Some insurance pros believe in the multiply-by-10 method. Take your annual income (what it is right now and not what you project it will become in the future) and multiply it by 10. The total is the dollar amount of coverage you'll need.

If you feel that this method doesn't give you a high enough number or that your dependents will have added expenses (such as college), add an extra $100,000 to the total. You can also calculate your financial contributions and financial obligations and then subtract any savings or assets you have. To calculate financial obligations, include all debts you'll have to pay, along with potential funeral costs.

While you may be tempted to save money right now by purchasing a less expensive policy, this strategy won't work if you have financial dependents or high debt.

Select a Qualified Agent

Buying life insurance isn't always easy. Understanding industry jargon is challenging for anyone — especially someone who is buying a policy for the first time. The more experience you have choosing insurance coverage, the more you'll learn about the process. But right now you need an expert to guide you.

Work with a licensed agent who is willing and able to give you the advice and information you need. Instead of plugging in a few numbers online and getting an instant quote from a website, opt for an actual agent. While insurance sites are quick and convenient, they won't walk you through your options or answer all your questions.

Do you need help choosing your first life insurance policy? Contact Harr & Associates Insurance, Inc., for more information.