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8 smart steps for buying life insurance

How to find coverage that meets your needs and budget

Life Insurance can form a vital part of your family's financial stability and well-being but, if you're like most people, you may find the thought of shopping for the right type of coverage a little daunting. Fortunately, these eight simple steps can guide you along the way.

1. Determine whether you actually need life insurance

Most people do, but not everyone. If no one depends on you financially, if you have no debt and would leave an estate with enough cash to pay its own taxes and expenses, you probably don't need life insurance. If you do not meet these criteria, you will need individual life insurance.

2. Calculate how much life insurance you need

There are two important questions to ask:

-What financial resources will be available to survivors after your death? For simplicity, consider three categories of requirements: (1) Social security and other retirement-related survivor benefits; (2) group life insurance; and (3) other assets and resources. It is also important to know when these resources will become available - for example, social security survivor benefits are payable immediately to a surviving spouse with dependent children, but only after age 60 if there are no children.

-What financial needs will your survivors have after your death. For simplicity, consider three categories of requirements: (1) final expenses; (2) debts; and (3) income needs.

Then subtract your survivors' financial resources (step #2) from their financial needs (step #3) to determine how large a policy to buy. Many people are underinsured, often because they skip these steps or take a shortcut (such as simply buying a multiple of annual income).

3. Consider other objectives you may have for your life insurance

Some types of life insurance policies include a savings feature that can be used for purposes other than paying death benefits.

4. Determine what type of life insurance best meets your needs

Essentially, there are three types of life insurance policies - term life, whole life and universal life. If you need the insurance for only a specific period of time, or are on a limited budget, a term policy, which has lower premiums, may be a good fit. If, however, you need the insurance for as long as you live and want to accumulate savings, a whole or universal policy may be a better choice.

5. Find out if you need to add any "riders" to the policy

There are two that you should consider - waiver of premium and guaranteed insurability. Some policies come with one or both included with the basic contract but, if not, it is generally a good idea to add them. Waiver of premium pays the life insurance policy premium for you if you are disabled. Guaranteed insurability permits you to add to the death benefit without providing additional evidence that you are in acceptable health.

6. Shop around

There are many ways to save money when buying life insurance, but they don't always entail paying a lower premium immediately. That said, life insurance is a very competitive business so quotes can vary significantly between companies.

Luckily, Stockton-Hill Insurance is an independent agency who has access to a multitude of life insurance companies, ensuring you get the best rates and products.

7. Decide whether to pay premiums annually

In most cases, it is better to pay annually rather than in installments because there is often a relatively large additional charge for paying smaller amounts more frequently.

8. Tell your beneficiaries about your life insurance policy

Once the policy is issued, inform your beneficiaries of the company that issued it, where to find the paper copy of the policy and any specifics about what you want them to do with the death benefit. While it is rare for people to be unaware they are the beneficiary of a life insurance policy, it does happen and you want to make sure that the benefit will not go unclaimed. And store your documents so that they can be easily accessed by your beneficiaries.

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