When you talk to an insurance agent, it might be easy sometimes to get the feeling that, if you haven’t bought life insurance by the time you’re 25, you’ve waited too long, it won’t be affordable, and you may not qualify. You’re caught in the sale close, the pressure that’s often exerted to get your money today. It makes sense, the longer an issuer collects your premiums, the more your payout is offset by earnings. However, from your point of view as a consumer, well, that’s not your problem.
Though the insurance buying process tends to be mystified by insurance companies, there are some basic questions that, once answered, simplify your insurance buying process. Stick with your answers and you can navigate through any sales obfuscation an agent can throw at you.
Do I Need Life Insurance in the First Place?
There’s no question your agent will say yes, but if you have no dependents, and you have assets that cover your debts and pay for your funeral, then you really don’t need life insurance. If, on the other hand, you need to provide for your spouse and children and your savings alone can’t do that, then you may well feel better with a policy that pays out in the event of your death.
How Much Insurance is Enough?
For most, this is where the uncertainty falls. Typically, it’s easy to think in terms of income replacement. That is, if you make a certain amount every month, you need an insurance policy that can create an income source in that amount, plus enough to cover estate taxes and a funeral. That’s simple enough, but there are some other things to consider, such as your mortgage. If you have life insurance on it, then mortgage payments end with your death, and you don’t need to account for those payments in income replacement. This can either provide you with a margin of safety in your life insurance settlement, or you can save that money today in the form of lower premiums on a reduced amount of insurance.
On the flip side, don’t forget about those things you’re not currently up to date on. For example, many people have savings goals that tend to suffer at the end of the month when other bills are being paid. Don’t forget to add the goal amounts into the income replacement scenario.