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Life Insurance Shopping for First Timers

When it comes to shopping for the perfect life insurance policy, the number of options available can bewilder even people who have some experience with insurance plans. For first-timers who are completely unfamiliar with the process, it can seem like a nightmare. Fortunately, picking out life insurance does not need to be as confusing as it seems!

Let’s break it down step-by-step for a better understanding of the process, especially for first-time life insurance shoppers.

Process of Buying a Life Insurance Policy

Just like cruising the market for any important purchase, choosing the right life insurance policy is not about which one is the best, but which one is best for YOU. Since these plans are designed to suit different requirements and capabilities, you need to select one that fits your needs – both right now and what you expect to need in the future.

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Understanding Your Needs

Many of us think that we only need to worry about life insurance when we have a family that is dependent on us. The fact of the matter is that a life insurance policy is an investment for your future, especially when you’ve retired from work, and you get better returns the earlier you invest in it.

When you’re young and healthy, life insurance can cost very little, as compared to later in life when you may pay higher premiums for the same returns. Of course, that doesn’t mean you should run out and get one today – just that you should start planning for it as early as possible.

Life insurance policies can cover everything from housing, educational and daily expenses, as well as retirement and estate planning. Take into account your current goals and motivation, where you see yourself in a few years and what you predict your expenses will be like. Based on those factors, you can gain a better understanding of what kind of plan will work for you.


Amount of Insurance Coverage Needed

According to a 2013 survey by LIMRA, a life insurance and financial services association, 30% of U.S. households have no life insurance plan at all, and 50% think they need more life insurance coverage than they already have. In addition, 86% of consumers state the cost of life insurance as a deterrent to buying it, and more than 50% of those surveyed said that food, clothing, transportation, energy costs and other regular expenses limit their ability to save for the future, or to buy life insurance even when they know they need it.

Contrary to popular belief, life insurance is very affordable – if you plan it right. Understanding how much coverage you need and when you need it is the key, as well as educating yourself about the different kinds of plans available. Whether you are single or have a family to support, you can find a great fit if you calculate exactly what you need.

Your current budget, earning capacity, age and financial goals are some of the factors to consider when you’re trying to decide on the amount of insurance coverage you require. There are some great tools available online which can help you crunch the numbers and reach a realistic estimate of the ideal coverage amount, like:

  • Life Insurance Needs Calculator by LifeHappens.org
  • Customized Life Insurance Calculator by CUNA Mutual
  • Lifetime Economic Value Tool by MassMutual


These tools use user inputs like age, income, mortgages or debts, education expenses and more, helping you reach a projected estimate of life insurance coverage needs that are personalized as per your current financial abilities and future requirements. Just put in the numbers and remember, the more information you add, the more accurate the results!

Choose Your Life Insurance Plan

If you want to pick the right life insurance policy, you need to understand the different kinds available today. They all provide death benefits and/or cash value, but can be differentiated on the basis of other factors like variable/non-variable policies, duration of coverage, lump-sum or distributed premiums, payout of dividends, benefits or cash value and more.

Non-variable life insurance plans are generally divided into four individual kinds of coverage, detailed below:

Term Life Insurance Plan – This is one of the most affordable and flexible plans, where you pay a lower premium amount, and receive coverage for a specific duration. It’s a good choice if you want to ensure that your loved ones receive a death benefit in case of your demise, but do not want to commit to the same plan for the rest of your life. A term plan does not build any cash value, but with certain plans you may later be able to extend the coverage or convert the policy to one that does.

Whole Life Insurance Plan – When you choose a whole life plan, you will receive an assured death benefit and lifetime coverage in addition to a policy that keeps building cash value while you’re alive. These factors, combined with a fixed premium, make this one of the most popular choices for life insurance, especially for those who planning for retirement. The downside of a whole life plan is that the premium is normally more expensive than term plans, and the cash value might build at a lower rate than other insurance plans.

Guarantee Universal Life Insurance – As opposed to term and whole life plans that require a fixed premium, Guarantee Universal Life or GUL policies allow you to change the premium amount and schedule within certain limits. These policies also offer flexible death benefits for your estate, combined with the option to build cash value on the policy. The cash value is normally determined by the premiums you have paid, policy charges and interest rates set by the insurer. If you opt for a GUL, remember that you only receive benefits if your policy is in-force, with timely premium payments and distributions.

Index Universal Life Insurance – With an Index Universal Life or IUL plan, you receive the same benefits of flexible premiums and death benefits offered by most Universal Life plans, but with a greater potential for cash value growth. You could receive higher rates of interest on an IUL than with a whole life or universal plan normally offers, since the interest rates are linked to percentage changes of a chosen financial market index, like the Dow Jones Industrial Average, S&P 500 or Nasdaq-100 Index. They also offer the option for fixed interest rates, allowing you a greater flexibility of choice on returns. The accumulated cash value of the policy can act as an income source, since you can choose to withdraw or borrow against it, tax-free.

Since different companies offer varied life insurance products, you should make your final decision after you’ve checked out all the options available to you. A plan that is a great fit for most people might not fit your particular requirements, so you should turn to an expert for the final stage.


Find a Qualified Agent

While you could immerse yourself in research, trying to understand all the factors involved in picking a great life insurance plan, it always helps to consult a specialist. Insurance agents can help you decide on the best policy, taking you through all the nitty-gritty details and analyzing exactly what you need.

Why Buy a Policy from an Independent Insurance Agent?

Independent insurance agents work with a number of insurance providers rather than just working for one. The benefits of turning to one for your insurance needs are numerous, and we’ve listed a few of them here:

  • More Choices – This is the number one reason why people prefer independent insurance agents. As opposed to being restricted to plans from one company, agents can offer you a wider range of choices for just about any kind of insurance.
  • Better Value – Since an independent agent or broker does not work for a particular company, he or she can help you compare various policies that fit your needs. This allows you to find a plan that gives you the best value and service at the lowest cost.
  • Detailed Information – Rather than trying to work through the jargon used in the insurance industry alone, a skilled and qualified agent can guide you through it. They can educate your about different plans, answer any questions you have and work with you to find the best fit.
  • Claim Assistance – A life insurance agent doesn’t just sell you a policy – most will also offer assistance when it’s time to file a claim. In case of your demise (or if you need to file a claim in your lifetime), they can explain the process and ensure that your estate receives a fair settlement.



How to Find a Qualified Life Insurance Agent or Broker

Whether you’re searching for an agent or company online or in your local area, you need to find one that is trustworthy, reliable and helpful. In order to find insurance agents whose service and standards are exceptional, keep a few things in mind:

  • Ask for Recommendations – When you turn to friends, co-workers and even strangers and ask them to recommend an insurance agent, you are more likely to find a reliable one. Look for customer testimonials on social media sites and the company website, to understand whether people have had a positive interaction with them in the past.
  • Set Up a Meeting – Meet the agents in person to understand if they seem helpful and dependable. Ask them questions about the kind of insurance they specialize in, whether they offer products from different companies, how well they understand your needs and any specific requirements that you have, how they will help you file a claim, and more.
  • Run a Background Check – Before you sign up with an agent, look into their background, the status of their license, how long they’ve been in business, customer complaints or disciplinary action, etc. You can find information on the insurance regulator website for your state, which you can look up here.


Of course, at the end of the day, your instincts could be the best guide. If an agent or broker seems genuinely interested in helping you find the best plan, offers information upfront and answers questions in a clear manner, you’re likely to be in good hands. If, on the other hand, they seem vague or try to push you into buying a policy without explaining it, you’d be better off looking elsewhere!

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