Life Insurance, Brattleboro, VT

Tips for Buying Life Insurance- First Timers

1.Understand your needs. No one understands your financial situation better than you. That means you should avoid letting someone else tell you how much protection you need. You can get a rough estimate of your insurance needs by adding together your debt, estimated funeral costs, and six months to a year of income replacement. Taking stock of your financial policy can allow you to select the right policy for your needs.

2.Understand term Life Insurance versus permanent insurance. Understanding the difference between term and permanent life insurance (such as whole life) can help you make an informed decision about your insurance needs. Today, a term insurance policy should be able to cover most of your debt and financial needs. In turn, you may not need to purchase a whole life policy. Try not to be sold by the “what if” scenario you might hear from an insurance sales rep.

3.Speak with an independent broker. These brokers will have access to many more products than just one firm can provide.

4.Avoid one-meeting recommendations. If your broker makes a recommendation in the first meeting, you know that they have not really analyzed your situation and looked for best options. So just say, “No, thank you” and keep researching.

5.Understand how the advisor gets paid. Find out if they are compensated through commission, fee-plus-commission, or fee only. If there is any commission involved with the sale, make sure to look at all alternative products available. With commissions, the advisor may have a conflict of interest. Just because your advisor is commission-based doesn’t mean they are bad — just ask more questions with them.

6.Recognize that insurance is for protection — not investing. Term insurance provides protection only, without a savings component. Whole life and universal life policies have a savings component and are much more expensive. You are almost always better off just paying for term insurance, and using the cost savings to invest elsewhere.

7.Ask the tough questions. Don’t be afraid to ask the advisor questions. You should know the product inside out before buying it. Is the policy renewable and non-cancelable? How long are premiums guaranteed for? Is there an accidental death rider? What are the exclusions?

Understand term insurance versus permanent insurance.

Understanding the difference between term and permanent life insurance (such as whole life) can help you make an informed decision about your insurance needs. Today, a term insurance policy should be able to cover most of your debt and financial needs. In turn, you may not need to purchase a whole life policy. Try not to be sold by the “what if” scenario you might hear from an insurance sales rep.

Insurance companies traditionally make more profit from whole life policies than term policies, so be prepared to hear a sales representative promote whole life as the best possible choice (even though it might not be the best fit for your needs). Remember, buy what you need and make adjustments as changes become necessary. Term insurance is typically renewable and should have a convertibility clause which allows you to make changes in the future. There are certain situations where a whole life policy maybe more advantageous than term; however, do not purchase it simply because your sales representative told you should.

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