Purchasing Term Life Insurance

Purchasing Term Life Insurance

Insurance can be both simple and complex. The process is simple, but you need to ascertain what you actually need.

It is wise to remember a basic premise of the Insurance industry when you are considering a life insurance policy. Life in

surance policies are actually not bought. In reality, they are sold by agents who usually work on commissions. These commissions are very high for the sale of permanent policies such as whole life. They are not very high for the sale of term life policies. Obviously, the agent will be anxious to convince you of the many benefits of whole life over term insurance. You need to remember that he is most likely thinking of his best interest and not yours.

The agent can be a source of information on all of the various options available in life insurance, but you might want to make your own decision ahead of time. If you have decided that a term policy is what best suits your needs and income level, you can approach the agent firmly to discuss the many advantages and options of different types of "term" policies. It would not be a bad idea to have several questions already answered before this process begins.

A term life insurance policy is designed specifically to

replace your lost earnings in the event of your untimely death. A person with a good financial plan should be able to estimate those earnings and project them into the future. The number and age of your children, the other sources of income and assets, and the earning potential of your spouse are all things to factor into your calculations. It is generally thought that the insurance death benefit should be equal to between 5-10 years of earnings. Of course, this figure will vary depending on each person?s own circumstances.

When you have settled on the amount of insurance coverage that is appropriate for your needs, you can begin the shopping process. The cost of purchasing term life insurance is much less than for permanent types of insurance, but there still are variations in price between different providers. The purchase should be treated like any other major investment. In other words, shop around and get several quotes before making a decision.

It is important to remember that there are two sides to purchasing term life insurance. In other words, you have to qualify. The process is called underwriting. Your health and lifestyle will determine the cost of your coverage. A medical examination will usually be required, and if you have a couple of months to live, you can be pretty sure that your agent will quickly lose interest in your business. Young, healthy, non-smokers can expect the lowest rates.
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