Buying life insurance can be complicated and frustrating, but these tips to buying life insurance will help make the process easier. At Raritan Valley Insurance Services, we are here to help! Let us navigate the waters for you!

Know Who You are Trying to Protect

The basic idea behind life insurance is to protect people who are financially dependent on you.  Typically this would be a spouse and children.  When you are thinking about buying life insurance, ask yourself who are the dependents you want to protect?  And how long do they need financial protection? 

If you have teenagers and all you want to do is make sure that their college education will be paid for, then a short term policy is enough.  If you have small children, then you need to think about a longer term. Life insurance is your backup plan to provide for your family if you die.

 If there is no one who is financially dependent on you, then you probably have no need for buying life insurance, especially if you have some through your benefits at work. For example, if you are a senior citizen, have no spouse and your children are grown, you might want to re-think your need for life insurance.  If may not be in your best financial interest to keep it.

Know How Much Insurance You Need

Once you know who you want to protect with your life insurance policy, then you need to figure out how much you need. 

Some insurance agents will tell you that you need a policy with face value that will cover you for 15 times your annual income.  What this means is if you make $100,000 a year, then the face value (and the benefits paid if you die) will be $1,500,000, 15 times your annual income.

Others will tell you something like 3 or 4 times your annual income plus outstanding debts is enough. When making this decision, remember that you are buying a product that will protect your family financially if you cannot do so.  You are not buying a product to make them wealthy.

Know Which Product to Buy

The two most common forms of life insurance are term life and whole life.

Term life is just plain insurance on your life.  It covers you for a set term, or number of years.  If you are 35 years old and have small children, then you might want to consider a 20 year term policy.  This will be in force until your children are financially independent.

Whole life is a combination of term life with some kind of investment product which builds cash value. For most people, using life insurance as an investment is not the soundest strategy.  However, it can make good economic sense for wealthy people given certain tax advantages.  If this seems to fit your situation, make sure you get an opinion from an estate planner and not just the person trying to sell the insurance.

Also, whole life insurance can be expensive. If you can’t afford the whole life policy, then look at the term. Use as much of the money you save on premiums as you can to make other investments that will build wealth.

There are many variations of whole life insurance, as well as other products such as universal life.  These can all be complicated and difficult to understand.  Before buying any of these products, get an opinion from a qualified insurance professional who has no interest in you buying these products. In the right circumstances, they can be good choices, but they are certainly not for everyone.

Know Your Options

You should never put all your eggs in one basket.  As with any major purchase, it’s best to shop around and find the best fit.  At RVIS, we are the experts.  We will quote you all of the best options available. 

Know Who You are Buying From

Buying life insurance is not like buying a product and your relationship with the company is over.  When you purchase life insurance, you are assuming that the company will still be in business 10 or more down the road. You are also assuming they will honor their commitments and pay what they have promised to pay.

So before you buy life insurance, check out the company. A.M. Best is one well-known and respected rater of insurance companies; there are many others.  Also check with the Better Business Bureau.

Follow these tips to buying life insurance, and you’ll be in a much better position to make a sound financial decision and get the coverage and peace of mind you are looking for.

As always, if you need assistance with life insurance, please contact your RVIS agent at (908)237-1800.