How to Buy Life Insurance

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  • Determine the purpose of your life insurance – Do you need it to protect your family in case you die? Do you want peace of mind? Are you trying to build up a nest egg for retirement?
  • Determine how much you need to accomplish this purpose – Most people get life insurance to take care of their family in case they die. Think about how much money it would take to replace your income for the rest of your expected earning life, and also about how much your beneficiary would need. If you have a young family and a one-income home, you might need a large amount. If you are elderly and single, you probably don’t need any. The amount of insurance to buy is a decision only you can make, but it might be helpful to talk to a financial adviser or insurance specialist to get an idea.
  • What type of insurance best fulfills this purpose – There are two basic kinds of life insurance. Term life provides a death benefit. Whole life (and all its variations) has higher premiums, and provides a death benefit with a savings account attached. Pick the type that fulfills your purpose. You can always keep your insurance needs and investment plan separate. Just skip the whole life, buy a term policy, and invest the difference in your 401k.
  • Figure out where to get a policy – There are countless companies, agents, websites etc. all very happy to sell you life insurance. Start with a local agent, preferably the one who handles your other insurance. This will give you information, background, and a price to start with. If you are getting a term policy, they are all similar so shop by price. Look over the exclusions to make sure it fits your needs. If you are getting a whole life policy, there are many, many varieties to choose from, and the differences among them all is too great to go into.