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Plan For Tomorrow | What to ask before you buy a life insurance policy
a young couple works with their financial professional on a life insurance policy.

What to ask before you buy a life insurance policy

Sunday 2 August 2020 | Reading Time: 4 minutes

 

Figuring out what kind of life insurance you need can be complex. To make sure loved ones receive financial support when you’re no longer around, you’ll need to talk to a life insurance agent and ask five key questions.

1. What should I look for in a financial professional?

Before asking any questions, you’ll likely need to find a financial professional1 first.  Having a professional who understands your specific needs, is aware of your financial situation, and provides helpful guidance while exploring various options can be very helpful when purchasing life insurance. Additionally, you might want to ask him or her about professional designations. Chartered Life Underwriter (CLU) or Certified Financial Planner designations, for example, are only achieved after dedicated training and study. It’s a good idea to research the company that professional associates with as well. Look for indicators of the company’s stability and trustworthiness. Pay attention to financial ratings assigned by rating agencies like A.M. Best.

2. How much life insurance do I buy?

An insurance professional can help you determine your life insurance needs, but you’ll likely want to know how he or she arrives at the figure, and what the number is based upon. The amount of life insurance you need usually depends on the amount of money needed to pay off your debts and the amount of money your dependents will need to continue their lives in your absence. Make sure your insurance company takes your financial status and future needs for your family into account before you commit to buying insurance.

3. How long should my coverage last?

Once you know the amount you need, you’ll need to pick one of two policy types – term life insurance or permanent life insurance. Permanent policies can be good for your entire life, while term life policies last only for the term you buy (usually 10, 20, or 30 years).

Term life insurance is cheaper with lower premium rates than permanent policies. People typically choose term life insurance to help provide income for the families they leave behind, to cover short-term debts and needs, to provide additional insurance protection for raising children, or to help pay for a college education. Be aware that premiums for term life insurance typically increase at the end of the initial term. If you stop paying premiums, you will also forfeit the death benefits, which could be a financial burden for your family.

Permanent policies can offer more flexibility and help cover you for the rest of your life. They can provide assistance to a retirement plan, income replacement, and caring for older family members. They may also include tax-deferred cash value growth potential. Figuring out whether term or permanent life insurance is the best option for you should be a carefully thought out decision. You should discuss all the pros and cons with your financial professional to help you decide.

4. What other benefits can a life insurance policy offer me?

In addition to providing a death benefit for your loved ones after you pass away, certain life insurance policies can offer additional benefits. For instance,if you’re looking to supplement your retirement income, certain policy types can help by offering a cash value growth potential feature. Think about what you want – is assistance with the cost of potential illness or the ability to explore certain financial opportunities? Chances are there may be a life insurance policy with a benefit that can help you with your needs. Ask your financial professional to give you more information based on what interests you.

5. What happens if I outlive the policy?

If you don’t pass away during the term, the death benefit won’t be paid out. However, as you get closer to the end of the term you may have the option of keeping your policy. This may likely come with an increase in your premium. It’s important to regularly meet with your financial professional to review your policy and ensure that it is continuing to meet your needs. Some term policies come with a “conversion privilege,” which allows you to trace in your old term policy for a new, permanent policy. Consult with your professional before taking any big steps.

Choosing the right type of life insurance policy can be a difficult task. There are many challenges and questions to ask yourself while deciding. Thankfully, the process doesn’t have to be done alone. If you want help from a financial professional, visit our find an agent page.


1. The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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