Personal Lines Education Article

Things to consider when buying life insurance

Purchasing life insurance is one of the most important financial decisions you’ll make. Not only does it protect the loved ones you’ll leave behind, it can be a useful tool well before then. While there are many things to take into account when purchasing life insurance, check out our list of some of the first five things to consider.

1. Decide how long you need coverage.
 Life insurance is designed to either last a certain period of time (called term life) or a lifetime (including whole life and universal life). If you only need insurance for a specific period of time (say, when your kids are growing up or for the length of your mortgage), then consider term. If, however, you need life insurance for as long as you live (for things like burial expenses or income replacement for a spouse), consider permanent coverage.

2. Calculate how much life insurance you need.
One way to determine the costs you’ll leave behind is through the “DIME” method. DIME stands for:
D - Debt (mortgage, private student loans, car loans, credit cards, etc.)
I - Income replacement (Consider the life expectancy of your spouse, dependents or anyone who depends on your income. Do you want       to replace your income for the rest of their lives?)
M - Mortality (burial wishes and costs)
E - Education (Do you want to fund education expenses for your dependents? What about childcare? If you have children in daycare, do        you want your policy to pay for their remaining years in daycare?)

3. Think about other objectives.
Some permanent life insurance policies can be used as savings. Permanent life insurance policies are lifelong and have cash value that’s meant to increase over time. These permanent policies contain a death benefit (or face amount), which is the amount paid at the time of death, and a cash value that grows over time on a tax-deferred basis, similar to retirement or tuition savings plans. It’s good to know the ways you can use life insurance in your financial portfolio.

4. Name a beneficiary.
Your life insurance beneficiary is the person or entity who will receive the proceeds of your life insurance policy. When choosing a beneficiary, avoid naming a minor child (children may not be able to receive funds) or your estate (it could have tax implications). If the policy is to benefit your business, you may want to have a formal plan in place for how the proceeds should be used. Explore your best options for choosing a beneficiary by speaking with your independent agent.

5. Talk with a trusted advisor.
When you’re ready to purchase life insurance, you need someone with your best interests in mind who can guide you through the process. Call us and we can help you with this.  

*This article is for information purposes only. For specific coverage details, always refer to your policy. If insurance policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies.
References:  -Insurance Information Institute