Learn and Plan | Questions to ask before buying life insurance
millennial couple discuss buying life insurance with financial professional

Questions to ask before buying life insurance

Dec 20, 2021, 7:01:35 PM | Reading Time: 4 minutes

Life insurance is a vital component of your financial security. If someone depends on you for financial support, such as your spouse or child, you should strongly consider purchasing a policy. But before you buy, it’s essential to ask yourself and your life insurance agent several important questions.

1. How do I pick the right financial professional?

Before asking any questions, you’ll likely need to find a financial professionalfirst.  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 the 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 need?

The amount of life insurance you buy 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. An insurance agent can help you calculate your exact life insurance needs, but it’s a good idea to ask questions about how he or she arrives at the figure, and what the number is based upon.  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 I have insurance coverage?

Once you know the amount you need, you’ll need to pick one of two policy types – permanent life insurance or term 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 tends to be cheaper with lower premium rates than permanent policies.

People who choose term life insurance typically buy it 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 with retirement planning, income replacement, and caring for older family members. They may also include tax-deferred cash value growth potential. Figuring out whether you should buy term or permanent life insurance is an important decision. Make sure to discuss all the pros and cons of each with your agent.

4. What can a life insurance policy do for 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 it 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 don’t die during the policy term?

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. So it’s important to meet with a financial professional regularly to review your policy and ensure it is continuing to meet your needs. Some term policies come with a “conversion privilege,” which allows you to trade in your old term policy for a new, permanent policy.

As you can see, it can be complicated to find the right life insurance policy for your needs. It’s important to ask a potential financial professional the right questions to help make the process easier to navigate. If you’re interested in exploring your options, 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.