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Step 1
First decide if you need life insurance. Not everyone does. If you are single, with no dependents, have no large bills outstanding, you probably don't need life insurance.
On the other hand if you are married, have dependents and large bills, like a mortgage, then you need life insurance and you will need a lot of it. Five to seven times your annual salary is a good range, therefore if you currently make $40,000 a year, a policy face value of $200,000 to $280,000 is what you want to purchase. -
Step 2
The next step is to decide what type of policy you want, term, whole life or variable life. This is easy, you want term insurance, pure and simple. It is cheap so you can afford it and it does what life insurance is supposed to do, pay money to your survivors. The other policies all have an investment part to them. A policy that supposedly does two, three or more things for you works just as well as the gadgets sold on late night T.V. that slice/dice/make the coffee/and scent the air. Not well at all. Keep your insurance separate from your investments.
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Step 3
What if you already have a life insurance policy but realize you need more coverage. You just figured out that $50,000 policy cousin Fred sold you is not going to take care of the wife and kids for too long these days if assume room temperature. DO NOT CANCEL ANY EXISTING POLICY UNTIL YOU ARE TOLD BY THE AGENT YOU ARE COVERED BY THE NEW POLICY!
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Step 4
Now where to buy a policy. Well you can always call the local agencies and ask for a quote but insist only on pure term. But be prepared for the agent to try to talk you into a cash value policy. Universal Life Insurance is sometimes represented as term plus a cash value. YOU DON'T WANT IT, ONLY PURE TERM! To begin to understand the problems with life insurance search the State Insurance Department website or the S.E.C. website for all the cases brought against many companies because of unscrupulous agents. There are honest agents out there and honest companies, but you as the consumer must insist on only buying what you want and need.
Besides the local agencies, search the web for the various quote services and get several quotes.
One often overlooked place for life insurance in your place of employment. Some companies offer reduced rate coverage or will pay part of the premium. Check this out but also bear in mind your coverage may end if you lose your job. For that reason it may be prudent to have a privately held policy that will be maintained even if you lose your job as long the premiums are paid. -
Step 5
ADDITIONALLY, don't be duped into buying a policy that will begin to pay for itself in a few years. First, the way this works is you are grossly overcharged in the early years and this means you are unable to purchase the protection your family needs. Second don't look at illustrations of money growing to ginormous amounts, these are hypothetical values and essentially meaningless. You must look at the guaranteed values only when dealing with cash value policies (BUT YOU WANT PURE TERM ANYWAY REMEMBER). Do not buy separate policies for your wife and children. Each policy carries a policy fee. Instead, get riders for your spouse and kids, kids only need enough coverage for final expenses, they are not breadwinners normally and LIFE INSURANCE IS ALL ABOUT INCOME REPLACEMENT. Mortgage Insurance is essentially very expensive decreasing term insurance, you can do better.
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Step 6
Term Insurance comes in a variety of flavors from Annual Renewable Term (A.R.T.) to Level Term (with varying years out to 20 years). Either of these is a good option. If your children have another 15 years until they are on their own and the mortgage needs paid, a large level term policy for 20 years might fit your need.
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Step 7
Use the information in this article as a beginning. Go to the library or search the net for information on personal financial planning. You will find out that you can make good informed decisions and take care of yourself and loved ones in the process.
Comments
ronaldroadster said
on 6/9/2009 Great info! I searched for a good life insurance policy that was affordable after i read this article. After searching i saw how expensive life insurance can be, which i cant afford. Well my friend told me to fill out a free quote form online where i can compare and shop on life insurance that was affordable. I found a very good life insurance policy that is very affordable now. I thought i would share with everybody how i found my affordable life insurance, here it is: http://cli.gs/affordable-life-insurance-quotes