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11 life insurance tips for buying the right policy

Purchase enough protection to pay off debts and sustain your loved ones if you're gone.

Insuring your life as an asset is an important part of financial planning. So you should understand the best life insurance tips for choosing a policy most appropriate for your situation. The right policy balances the coverage your family needs, the type of policy that offers the most financial return and premiums that fit in your monthly budget.

1. Purchase life insurance when you’re young and healthy.

Your premiums depend on how likely your insurance company is to pay out a death benefit to your loved ones. So it follows that you’ll find lower premiums if you buy a policy when you’re nowhere near the end of the average lifespan.

Plus, if your rate gets locked in, you can pay the lower amount for a long time period — whether or not your risk is increasing with age or health problems. Similarly, you can buy the policy before any health problems surface, avoiding the hefty surcharges that balance out health risks.

Find some of the best rates with policies during your 20s. Finding a new policy in your 30s works well too.

2. Go for level premiums if you’re buying long term.

Whether you benefit more from a stepped or level premium depends on your financial situation. Stepped premiums increase as you grow older, but the initial cost starts out much lower than level premiums. However, the premiums continue rising each year until the end of your term.

On the other hand, a level premium remains the same until you reach the end of your term. While your premiums start higher, you could pay less overall than if you’d chosen a stepped premium.

Level premiums make the most financial sense long term. But you might consider stepped premiums if you need the lowest price possible and don’t expect to keep your policy for long or know you’ll be able to afford the increased rates in the future.

3. Think about your income.

When figuring out the right amount of life insurance coverage, you can start with how much income you make right now. Then factor in other costs outstanding debts, future savings you’d like to leave your family and your expected funeral costs. An easy way to determine your ideal number is to use a life insurance calculator.

In addition, having disability insurance can replace your monthly gross income up to 80% if you can’t work because of an illness or injury. The monthly stream of income can ease your financial burden by providing for your family’s daily needs.

4. Opt for comprehensive coverage.

Protect yourself against a range of risks by taking out multiple types of life insurance. Also, you might consider policies with extra features like life insurance with end-of-life benefits. Combined, these life insurance policies can offer comprehensive protection for you and your family:

5. Improve your health habits.

One major factor that affects your premium is your overall health and lifestyle habits. For example, smoking raises your policy’s cost because it raises your health risks compared to non-smokers. In addition, you could see a low premium if you maintain a healthy body weight.

Even if you don’t keep healthy lifestyle habits, you could get a policy now to make sure you have coverage. Then request your company to give you a new health exam after improving your lifestyle. If your health has improved, that could lower your rates.

6. Review your policy on a regular basis.

As you go through major life changes like buying a house or having kids, your life insurance needs can change. The policy you took out at 30 years old may not offer the right coverage when you’re age 55 and nearing retirement.

Review your coverage regularly to make sure your current level suits your life situation. If you have too much coverage, you could save money by lowering your death benefit amount. If you don’t have enough coverage, you could ladder policies to cover each major debt until they’re paid up.

7. Make annual payments.

Paying your premiums all at once can save you up to 8%, depending on the insurance company. However, only a handful of companies offer this discount, including AIG, Brighthouse, Principal and Prudential. And most people won’t be able to afford to pay thousands of dollars up front.

8. Be honest with your application.

Your insurance company will ask personal information about your lifestyle, medical history and any risky hobbies as part of its underwriting process. While you wouldn’t give out this information to other businesses, life insurers need it to create an accurate picture of your risk level. That risk determines your premiums.

Because the information directly affects your policy, you shouldn’t sneak details by the insurer or otherwise try to lie on your application. Otherwise, you could void your policy if you don’t disclose all pertinent details.

9. Weigh the future possibilities with your spouse.

Sit down with your spouse or partner and talk about how you might cope with finances if one of you died. By assessing your finances together, you can agree on how much life insurance all family members need.

You can also apply for a joint-owned life insurance policy, covering death or terminal illness for either person on the same policy. Plus, you can take advantage of discounts some insurance providers offer for this type of policy.

10. Choose trustworthy companies.

You can compare hundreds of insurance providers in the market. But the best life insurance choices have proven track records with high business and customer ratings, especially for customer service and claims processing.

Consider companies with strong finances backed by rating organizations like AM Best and highly rated business practices through the Better Business Bureau (BBB). Along with business ratings, look for quality customer reviews on the BBB, Trustpilot or another reputable third-party review site.

11. Use a professional adviser if you need help.

A life insurance adviser is worth considering, especially if you use a fiduciary adviser. Fiduciary advisers pledge a commitment to finding the best policy match for you, no matter their own financial gain.

These advisers can navigate the life insurance world with you, balancing the best of your budget and coverage needs. Because of their extensive financial knowledge, they can recommend options you may not know exist for you.

To find an adviser, you can search online for financial planners with certifications. Consider an adviser with Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), Chartered Financial Analyst (CFA) or Personal Financial Specialist (PFS) certifications behind their names.

Compare life insurance quotes from top brands

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Policygenius - Life Insurance
18 - 85 years old
10, 15, 20, 25, 30 years
Depends on provider and policy
Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
20 - 60 years old
10, 15, 20, 25 or 30 years
No, for coverage up to $3M
Apply for term life insurance online without the medical exam. Get an instant decision and adjust your coverage at no charge.
18 - 60 years old
5, 10, 15, 20, 25 and 30 years
Compare 40+ insurers and apply online to get the lowest possible price — no medical exam required.
Everyday Life
18 - 70
10, 15, 20, 25, 30, 35 and 40 years.
Ladder multiple life insurance policies to save on the coverage you need for all your debts.
18 - 60 years old
10, 15, 20, 25, 30 years
Get a quote and apply.
21 - 60 years old
10, 15, 20, 25 or 30 years
Depends on policy
No-exam term policies up to $1 million online, with the option to upgrade to permanent life insurance later.

Compare up to 4 providers

Bottom line

If you follow these life insurance tips for buying a policy, you can maximize your benefits with the amount you pay for monthly premiums. Make sure you take advantage of all savings options available, and ask for help if you have questions about your coverage needs.

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