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How and When to Buy Life Insurance

How and When to Buy Life Insurance

Death may be coming for all of us someday, but that doesn’t mean it’s a nice thing to think about. While you may be able to block out the thoughts of your mortality most of the time, there is one time when thinking about your own demise is actually important: when making decisions about life insurance. It’s understandable that buying life insurance can intimidate people to some extent. However, knowing when and how to buy it could do wonders for your family after you’re gone. For more help with life insurance or any other financial planning conundrums, consider working with a financial advisor.

Life Insurance Defined

Life insurance is a product designed to give your family financial support after you die. You pay into a policy while you’re alive, and after you die your designated beneficiaries get a predetermined amount of money. This can be paid as either a lump sum and or through annuity-style payments over time.

There are two basic types of life insurance:

  • Term life insurance: These policies last for a specific period of time. This is generally around 10 years, but could be as few as 5 or as many as 30. This insurance only pays out if you die during the specific period in your contract.
  • Whole life insurance: On the other hand, this type of life insurance is permanent. You pay an annual premium in perpetuity, and as long as you keep paying the premium, the death benefit is guaranteed.

When Should You Buy Life Insurance?

How and When to Buy Life Insurance

In theory, you can get life insurance whenever you want. A 22-year-old with no dependents could get a life insurance policy if he or she wanted. However, this  would likely be a waste of money. With no one relying on your income, there really is no need to make sure anyone keeps getting money after you die.

Life insurance becomes much more important once you get married and have children, though. Let’s say you are married with two kids, and both you and your spouse work full-time salaried jobs. If you were to die unexpectedly, your spouse would be left in the lurch with two children to provide for and only one income stream. On top of that, there are funeral expenses and other end-of-life costs that would have to be taken care of.

Long story short: When you have people who are depending on the income you bring in, it’s time to buy life insurance. Hopefully it will never be needed, but you’ll sleep better knowing that you have it just in case.

How to Buy Life Insurance

Once you make the decision to purchase life insurance, there are a few ways to go getting it. The first is to contact a broker yourself. You’ll want to make sure you shop around for the best price and plan for you and your loved ones’ personal needs. After you make contact with a broker, you’ll have to answer a number of questions about your medical records and background. In fact, you may even need to get a physical. You can contact an agent online or in person, depending on the company.

Another route you can go is to visit websites that cultivate life insurance quotes from around the market. SmartAsset is one of those sites, so visit our page of life insurance quotes to get started.

Finally, you can also use a financial advisor who’s also an insurance agent. This person will be able to advise you on your insurance needs based on your overarching financial situation. One thing to keep in mind is that insurance agents often work on commissions, so they may be incentivized to sell you a product that will bring them extra money. Make sure you trust your advisor or agent, and do your own research so that you go in with some idea of what you need.

Bottom Line

How and When to Buy Life Insurance

No one wants to think about life insurance, wills and other end-of-life situations. Nevertheless, it’s an important thing to consider as you get older, so you can feel confident your family around you will be taken care of.

When you’re young and don’t have any dependents, life insurance may not be necessary. Once you have a partner or children, though, it’s important to consider if they will need life insurance payments to stay afloat if you were gone. Again, if you decide you need life insurance, you can contact a broker at a firm or work with a financial advisor who is also an insurance broker.

Financial Planning Tips

  • A financial advisor can help you with your life insurance needs and any other questions you have about protecting your family’s future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors, get started now.
  • Another way to protect your family’s future is to save for retirement early. If you have access to a workplace retirement plan like a 401(k), make sure you use it. This is especially important if you can take advantage of any company matches that are available.

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