Life insurance will protect your loved ones in case you die. This is an essential coverage to have under all circumstances, but especially if you have young children, have a dangerous job or have a disabled spouse, all cases in which your family will need the money desperately if something happens to you. Choosing the right policy is essential when buying life insurance, as you want the best option to fit your budget, lifestyle and needs.
Step 1
Calculate how much insurance coverage you need by using online calculator such as the one available at bankrate.com (see Resources). You will need to answer a number of questions to help the calculator estimate how many years your family needs to be covered, what annual income will the survivors need and whether you have children, in which case college expenses can be added on. You can also talk to an insurance agent to review your financial needs.
Step 2
Determine what type of life insurance is best for you. For example, Cash Value Insurance doesn't have an expiration date, but premiums are high and you may incur in penalties if you decide to cancel it. On the other hand, Term Insurance has an expiration date and premiums increase as you get older. Term Insurance, however, can cover financial obligations that are temporary, such as college tuition, while Cash Value Insurance can only be cashed at once (or you can choose to borrow against).
Step 3
Find an insurance company that is licensed in your state. You can do this by searching through the Consumer Action website (see Resources). While is possible to buy insurance over the phone or even online, a face-to-face meeting with a counselor is better, as you will be able to discuss the specifics of your case and decide what works best for your situation.
Step 4
Evaluate your lifestyle and make a list of basic information before your meeting. An insurance agent will ask you about medical history, habits (such as smoking or dangerous recreational activities), occupation, age and even family history (to evaluate your risk for conditions such as diabetes or heart disease). It's important that you are clear and honest about this information, as lying now could result in your policy being canceled later on. Depending on your answers, you might be asked to pass a medical exam.
Step 5
Evaluate any policies offered before you sign the final contract. The two most important things to consider are whether the monthly premiums are affordable and what amounts are guaranteed and under what circumstances. Ask questions about anything that seems unclear and make sure all data is correct. Also, check when the insurance becomes effective. Ideally, it should happen as soon as possible (or on the same day) after you sign the contract.
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