How to purchase a life insurance policy for the first time
Buying life insurance for the first time is an important decision. The right coverage can help you protect your loved ones in case you are no longer there.
Life insurance is a part of the necessity and is essential at any age. There are ample advantages of starting early because you simply cannot beat the rates you can get on a life insurance policy when you are in your 20s or 30s, and in sound health.
The following tips can help you make the purchasing process easier, especially if this is your first time.
Know the actual purpose of life insurance
Life insurance can help to protect your loved ones financially when you are no longer there. It means the availability of money would not be a problem when it is needed the most. As a result, your loved ones can spend more time helping each other cope up through a particularly difficult time, and spend less time worrying about how to pay the bills.
In your absence, a life insurance policy can help your family:
- Cover daily expenses.
- Maintain the same lifestyle.
- Settle debts.
- Fund higher studies.
What is the right life insurance choice for you based on your needs and budget?
There are primarily two types of life insurance:
Term Life Insurance: It is the most affordable life insurance option if you are in your 20s or 30s. Term Life Insurance is something you purchase for a set period of time, say 10 years, 20 years, 30 years, etc. And now, term length options have actually increased from 5 to 50 years, which is absolutely great news considering its affordable price, simple application process, and easy convertibility options.
When the term is up, you can easily choose to convert the coverage to a permanent plan (depending on your needs at that point in time) or choose to renew the coverage without having to answer health questions.
Permanent Life Insurance: This type of coverage typically costs more than a term life plan, but lasts a lifetime. Permanent Life Insurance also comes with a cash value option, that can help to grow your money inside the policy. You may choose to access this money while you are alive or leave behind more funds for those you care about.
Once you determine the type of coverage you want, you should find out how much your loved ones will need to continue the same lifestyle in your absence. Here’s how you do it:
- Add up your monthly household expenses including the likes of monthly bills, groceries, loan payments, mortgage, etc.
- Add up your planned expenses like RRSP contributions (if any), contributions to your child’s education, etc.
- Your expected one-time costs such as funeral expenses.
Once you gain an estimated idea of your expenses for an entire year, multiply the same by the number of years you think your loved ones would have to depend on that money. A Trust Life financial advisor can help you finalize this at no additional cost and zero obligations.
Finally, remember you should also focus on insuring your health and your ability to earn a paycheck
Did you know you have a significantly more chance to experience a serious injury or illness before you retire or die? Ask yourself this question: what will happen if a serious injury or illness keeps you away from work for quite some time? Won’t you need money during those difficult times to support your family while you recover?
If the answer is yes, think of having critical illness insurance and disability insurance as a part of your plan. Both are available as standalone options or as a rider to your existing life insurance plan. Our financial advisor can again help you determine which one is the best for you depending on your budget and needs.