You may already know that you need a life insurance policy, or at least that buying coverage is probably a good idea. After all, the right policy can offer peace of mind that your spouse, children, and other loved ones are financially protected if something were to happen to you.
But where do you even start when it comes to shopping for life insurance? How do you find a carrier you can trust, at a cost you can afford? And really, how much life insurance is enough?
Here are six easy steps to follow if you’re looking for a new life insurance policy.
Step 1: Determine How Much Coverage You Need
The very first thing you need to do when shopping for life insurance is to figure out how much coverage your new policy needs to provide.
There are so many personal factors that go into a life insurance needs calculation. You’ll want to take into account things like:
- Your income and how long you’d need to replace that for your family
- The ages of your children and how long you want to support them
- Shared debt, such as a home mortgage or credit card balances
- Life events that you want to cover, like your kids’ college tuition, future wedding expenses, and/or the down payments on their first homes
- Charity and other legacy causes
- Final expenses such as a funeral and potential medical bills
You should also factor in your current assets, your spouse’s income, and any other funding sources.
Everyone’s sweet spot in terms of coverage amount will be a bit different from the next guy’s, and you may even find that your life insurance needs change over time. Most people can get a pretty good idea of how much coverage they need, though, and you can always buy a little bit extra to account for the unexpected.
Step 2: Decide How Long Coverage Should Last
Do you only need life insurance until your current teenagers go off to college or are you planning to support your family for the next 30 years, until the home mortgage is paid off?
The next step in your shopping process is to decide how long you need your life insurance coverage to last. This number can be impacted by the ages of your children, how much shared debt you and your spouse have (and when it will be satisfied), and even how comfortable you want your family to be in your absence.
If you have a spouse, child, or other loved one with long-term needs, you may need to opt for coverage that lasts a lifetime. If you only want coverage to protect your family through crucial years, a temporary policy should suffice.
Step 3: Pick Your Policy Type
Now that you know how long your life insurance policy needs to last, it’s time to choose your policy type. The two most popular options are term and whole life coverage.
The former is coverage for a specific period of time, usually offering somewhere between 10-40 years of life insurance coverage. This is ideal if you’re looking for more affordable coverage that falls off once your kids are grown or you’re more financially secure.
Whole life coverage, by contrast, is life insurance that is intended to last the rest of your life. Premiums are a bit higher (about 5x as much as term life, on average) but will offer a steady death benefit to your loved ones no matter when you pass away.
Some other policy types to consider include accidental death benefit coverage and universal life.
Not sure which type of coverage is right for you and your family? Leap Life agents are available by phone to answer any questions you may have about the different policy options, as well as match you with personalized quotes when you’re ready to buy.
Step 4: Consider Policy Riders
Riders are life insurance policy add-ons that offer additional protection on top of your standard death benefit. These can be very beneficial to have, depending on your situation, though they often come at an added cost.
Some of the more popular life insurance riders include the:
- Long-term care — If you find yourself needing assistance with basic daily living tasks, a long-term care rider can allow you to access a portion of your policy’s death benefit while you’re still alive. These funds can usually be used to cover in-home medical care, facility care, medical supplies, etc.
- Child rider — This rider pays out a small benefit if one of your children were to pass away during the primary policy’s coverage period. The funds can be used to cover final expenses, medical bills, and the like.
- Return of premium — With this optional rider, available on term policies, you will receive a refund on premiums paid for coverage if you don’t pass away during the policy’s covered benefit period.
Step 5: Calculate Your Budget
Five million dollars in permanent life insurance coverage may sound great to you and your loved ones… but not if you can’t afford to keep the policy in good standing. That’s why calculating your budget is the next step in buying coverage.
As mentioned, term life insurance is usually a much more affordable option than whole or universal life. So if you need low-cost coverage for a set period of time, that’s probably your best option.
Otherwise, consider how much you can afford to spend on monthly premiums and for how long. You may need to adjust the overall coverage limit, term length, optional riders, etc. to find the right price point.
It’s also important to remember that the earlier you buy life insurance — before you get older or develop health concerns — the cheaper your coverage is going to be.
Consider Employer-Sponsored Coverage
Many employers offer group life insurance coverage to employees. These policies generally come at a much more discounted rate than individual coverage, and may make for good supplemental life insurance.
They aren’t perfect, though. Workplace policies aren’t often portable, so if you leave your job, get fired, or retire, you will usually lose your coverage. They generally have coverage limits as a multiple of your salary, as well, which may not provide enough protection for your loved ones.
Step 6: Start Shopping
Now that you know what you need and for how long, it’s time to shop around for the perfect policy from the right carrier.
You’ll want to choose a carrier that is well-rated, so you know they’ll be around (and financially solvent) if and when your family ever needs to file a claim. Aim for an AM Best rating of at least an A, if not higher.
You should also get quotes from multiple carriers, ideally at the same time. This helps you find the best possible rates while only requiring you to enter your information once.
Buying life insurance is one of the most important financial decisions you can make… but that doesn’t mean it has to be difficult. By following these six steps, you’ll be on your way to protecting your loved ones in no time, with a solid policy that you can afford.
LeapLife makes it easy to get matched with A (or higher) rated insurance companies that can protect those you love most. Coverage is available for up to $5 million and with terms as long as 40 years. Not sure what you need? Our agents are also available by phone to answer your questions and help match you with the right policy quotes.