Life insurance can be a daunting purchase.  While many families know they should purchase it, the majority don’t know how or where to begin.   With that in mind we have compiled a list of the 5 tips to help any first-time buyers for life insurance.
Tip 1. Understand Why You Need Life Insurance
Most people understand that life insurance is designed to provide families with financial security in the event of the death of a spouse or parent.  However, we have found that many don’t know that life insurance protection can help pay for mortgages, a college education, help to fund retirement, day-to-day living expenses, and even charitable bequests.
If others depend on your income for support, you should strongly consider life insurance.  The younger you are when you purchase a life insurance policy the cheaper it will.  So, even if you don’t have any of the needs mentioned above immediately, you still may want to consider purchasing a small policy.
Tip 2. Determine the Amount of Life Insurance Coverage You Need
The amount of money your family or heirs will receive after your death is called a death benefit.  There are a number of ways to calculate the right coverage amount to ensure your family will have enough money to maintain their current standard of living.
The first way is to simply take your annual salary and multiple it by 8 or 10.   The next way is to add up your current monthly expenses and add any additional future expenses (like a college education) for a total benefit amount.   A third way is to use an online calculator that will help determine a proper benefit amount.  And the fourth way is to sit down with a licensed life insurance agent who can help guide you through determining a proper benefit amount.
Tip 3. Find the Right Type of Policy
Once you’ve got an estimate of how much insurance you’ll need, it’s time to think about the type of policy that best fits your needs. Today life insurance comes in many varieties, but there are four basic types term, whole life, universal life, and variable life. As a first-time buyer, one will more than likely fit your needs.
Term Life Insurance
As its name implies, term insurance provides life insurance protection for a specific period of years. Benefits can be used to help pay off mortgages and other outstanding debts in the event of a premature death.  This is usually the least expensive form of life insurance as it doesn’t accumulate a cash value or receive dividends.
Whole Life
In contrast to term insurance, whole life, also known as permanent insurance, protects you throughout your lifetime, from the day you purchase the policy until you die, as long as you pay the premiums.
Whole life insurance also builds cash value that can be accessed by the policyholder through policy loans.  The policy loans are paid back by decreasing the benefit amount by the amount of the loan plus any accumulated interest.
Whole life insurance is guaranteed for life as long as the premiums are paid, regardless of your health conditions.  Because these policies are permanent they are also eligible for dividends from the issuing life insurance company.
Universal Life
Universal life also provides permanent life insurance protection and access to cash values that grow tax-deferred. Universal Life differs from whole life in its flexibility that enables you to choose the amount of protection that best suits your family or business. With Universal Life, you can increase or decrease your coverage, as your insurance needs change and control the amount and frequency of premium payments.
Variable Universal Life*
Variable Universal Life insurance is a type of flexible premium, permanent life insurance policy that allows the policy owners to have premium dollars allocated to a variety of investment options.  Variable Universal Life Insurance generally provides a federal income tax-free death benefit, and is accessible through policy loans and/or withdrawals.
There are risks associated with investing in variable universal life insurance policies. Please be aware that assets allocated to the Investment Divisions are subject to market risks and will fluctuate in value. Please be aware there are fees and charges associated with these policies.
Tip 4. Look at the Quality of the Company
An insurance policy is only as good as the company that backs it. You want to know for certain that the company that issues your policy will be around to service it and eventually pay the death claim. To help you discern the strongest companies, there are several ratings agencies that rate insurance companies on the quality of their fiscal fitness, quality of investments, and overall financial soundness. A credit rating represents an independent assessment of the insurer’s ability to pay its claims on time and meet all its other financial obligations, the bottom line for any life insurance company. There are four leading agencies: A.M. Best, Standard and Poors, Moody’s, and Fitch.
Each agency has slightly different criteria and looking at different ratings for one company will give you a good overview of the company’s financial strength.
Tip 5. Consult a Life Insurance Expert
A Life Insurance Agent provides an invaluable service.  In addition to assisting with the setting up your initial policy and calculating a proper insurance limit, a life insurance agent will help you update your coverage as your needs change.