Steps in Buying Life Insurance
Shopping for life insurance can be daunting task. Fortunately, iBroker is here to help.
First- Determine your Goals. What will the policy be used for?
There are essentially three components to life insurance.
- Death benefit coverage. Every policy will include a death benefit to be paid out should the insured person die. Many policies also include the following:
- Tax Free Investment Utility Vehicle.
- Long term care.
How much insurance do you need?
- If for death benefit coverage: Multiply your income by 5. Add all your liabilities (mortgage, car payment, business liabilities, etc…) – This should give you a good baseline. Adjust as necessary, or use our Life Insurance Calculator.
- If long term care: Use our long term care calculator.
- If investing: What is your goal nest egg for when you retire?
How much can you afford?
Term insurance: This is the cheapest option as it is designed just for the death benefit for a specified amount of time. Policy ends when term ends. Once the term is over, if you are still alive, congratulations on outliving your policy! You’ve already won. This is great for people who need higher coverage for a temporary period of time (kids in school, house has mortgage etc.).
Return-of-Premium (ROP) Term Insurance: This is similar to a term policy, except it is more expensive but gives you your entire premium contribution back at the end of the policy term. Good for individuals who need higher coverage for a temporary set time.
Permanent/Whole Life: This is designed to cover you for the rest of your life as long as you continue to make your payment contributions. This policy is more expensive than term/return of premium term.
Whole Life/Universal Life: The basic version of these policies includes a death benefit and you pay premiums/coverage extends until your death. The cost of these policies goes up over time, but if you start paying for them while young, you can lock in great pricing for your lifetime.
Indexed Universal Life: This is designed to give you coverage for the rest of your life as well as set aside a portion of your payment for investment. Investment is tax free. The cost of this policy is the most expensive of the four options. Depending on however much extra you can set aside for retirement planning, the premium here can be adjusted to meet that need.
How should I think about this?
Do you need permanent coverage over your entire lifetime, or do you only need coverage for a specific period of time, for example the duration of your mortgage, or the time it takes for your kids to graduate and get jobs?
Are you looking for an investment vehicle or pure death benefit coverage?
The Application Process:
- Quoting: takes less than a minute if you know what you want.
- Application: takes about 15 minutes or less for most cases. Obviously the more illnesses or incidental hospital visits you’ve had, the longer it takes to fill out this information.
- Underwriting: Generally takes anywhere from 2 weeks to 6 weeks. Most delays are due to getting doctor’s or hospital records.
You’re covered, but it’s time to re-evaluate your coverage.
- Experiencing life altering changes? Make sure your coverages are updated to reflect the changes you want to make.
- New job and need higher coverages?
- Just got married and want to change your beneficiary?
- You now have kids and want to increase your coverage to protect them?
- Just bought a house and your liabilities increased?
- Started a business and need key man life coverage?
Working with an iBroker representative can help make this whole process easier. iBroker can help explain the differences between policy types, calculate the coverage amount you need, and present potential options that may best suit your needs.