Buying life insurance: A Shopping Checklist
When shopping for term life insurance, you want to find the
right amount of insurance coverage at a reasonable price with a
company you can trust. But for many people, getting started is
the hardest part. That's where the following Life Insurance
Checklist can help.
1. What you would like your policy to achieve? Ask yourself what
it is you want your life insurance to do. For example, do you
want to have insurance coverage that will:
* Pay funeral arrangements? * Pay the outstanding balance owing
on a mortgage and other debts? * Offset the loss of your income?
And if so, for how long? * Contribute to the future education of
your children? * A combination of all or part of the above?
Knowing what you would like to accomplish with your life
insurance policy and approximately how much you need to achieve
these goals will help you determine how much life insurance you
should consider purchasing. Online life insurance calculators
are available to help you put a dollar value on the amount of
coverage you need.
2. Who would you like to insure under the life insurance policy?
Most insurance companies offer a variety of life insurance
products to suit your lifestyle and family needs. You can get an
insurance policy on your own life, or you can get one policy for
both you and your spouse (called a joint life insurance policy).
The most common joint life policy provides coverage when the
first partner dies, leaving the life insurance benefit to the
surviving spouse.
3. How long will you need life insurance? Consulting a psychic
isn't necessary, although it does require that you estimate the
timing of your life insurance needs. For example:
* When will your mortgage be paid off? The amortization period
of your mortgage will often determine how long your term life
insurance policy should be. * When will your children be
finished school? One day they'll finish their education and
having enough life insurance coverage to pay their educational
expenses won't be necessary. * When are you planning to retire?
You will have less income to replace at that time.
Knowing how long you'll need life insurance coverage before you
begin shopping will ensure you're comfortable with the life
insurance product you end up purchasing. Online tools are
available to help you figure out which term for your life
insurance policy is most recommended for people with similar
lifestyles.
So now that you've got the how much, who and how long questions
answered, you're ready to shop.
1. Compare life insurance quotes from multiple companies: It
pays to shop around because life insurance rates can vary
considerably depending on the product you choose, your age, and
the amount of coverage you request. This is the easy part,
because with the Internet you can compare life insurance quotes
easily, online, anytime.
2. Which life insurance rate has been quoted - standard or
preferred? There are two basic life insurance rate groups you
should know about when shopping for life insurance coverage:
standard rates and preferred. Standard life insurance rates are
the rates the majority of Canadians qualify for, while about one
third of the population is eligible for preferred rates.
Preferred life insurance rates are typically offered to very
healthy people and means you may pay a smaller premium than
most. Usually preferred rates are offered only once the results
of the medical information and tests are known. It will depend
on your blood pressure, cholesterol levels, height, weight, and
family health history. But preferred rates are worth it. They
could save you up to 30-35% off your quoted premium.
When comparing prices, make sure you're comparing 'standard to
standard' or 'preferred to preferred' life insurance rates. If
you're not sure, ask the broker. It would be disappointing to
find out you were quoted preferred rates at the beginning, only
to find out you don't qualify for them later.
3. Review the life insurance broker's availability: How easily
can you get a hold of the broker? What are their hours of
operation? Whether it is through their website or telephone, the
life insurance broker should be easily accessible to you should
you ever have questions or need to speak to them about a change
in your life insurance needs. Look for toll-free numbers and
extended hours of service as guides.
4. Review the medical information required to obtain the policy:
Typically the more medical information you provide, the better
the price. For a policy that asks few or no medical questions,
you can bet the premium is higher for the same coverage then a
plan asking for more information. Depending on the company, your
age, and the amount of coverage you want, you could be asked to
provide blood and urine samples. To obtain the samples, a nurse
will visit at not cost to you.
5. Consider a life insurer's financial stability and strength: A
company's financial stability is something to consider if you
are planning on making a long-term purchase like life insurance.
There are organizations out there, like A.M. Best, that evaluate
insurers and provide a rating on their stability and strength.
6. Ask about renewal options and requirements: Once the initial
premium is set, it is usually guaranteed for the length of the
policy (often 10 or 20 years). But what happens when the policy
expires? Most policies are renewable until you are 70 or 75 so
don't forget to ask your broker if you will have to take a
medical to renew your policy. While your premiums will be higher
on renewal, find out if they will also be guaranteed to remain
level for the second term of the policy.
7. Confirm the policy can be cancelled without penalty: Most
term life insurance policies can be cancelled at any time
without penalty. Make sure to check with your broker to see if
the life insurance company has any unusual cancellation policies.
8. Consider the conversion options and restrictions for the
policy: As your life changes so do your life insurance needs and
you may want the option to convert your coverage some day.
To convert a term life insurance policy means to transfer all,
or part of, the death benefit of the policy into a permanent
life policy without a medical. For example, say you originally
bought a term policy to protect a mortgage and child. Once the
mortgage is paid and the child grown, you might find it
desirable to convert the policy into one that will give you a
new level premium for the rest of your life, and a death benefit
that is guaranteed not to expire as you age.
When you purchase your life insurance policy, find out if there
are any limitations on your age at the time of conversion. In
most cases, you have the option of converting up until you are
60 or 65. As well, ensure you are given several options of the
type of policies you can move into, the more the better.
Final tip - choose a life insurance broker you trust: While it
doesn't necessarily impact the type of policy you choose to
purchase, a rapport with your broker is critical in feeling
comfortable with the life insurance policy you buy and the
information you've received.