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Essential tips for first-time life insurance buyers

Thinking of buying life insurance for the first time? If so, you are probably asking yourself questions, such as "How much do I need?" And "What kind of policy is the best?" And "What company should I buy from?" There is no question that buying life insurance for the first time, like any other new experience, can be a bit overwhelming. Here are six top tips that we hope will make the process that much easier by eliminating frustrating false starts and unnecessary obstacles along the way.

Understand why you need it

While most people need life insurance at some point in their lives, don't buy a policy just because you hear it's a good idea.

Life insurance is designed to provide families with financial security in the event of the death of a spouse or parent. Life insurance protection can help pay for mortgages, help with college education, help finance retirement, help with charitable wills, and of course help with estate planning. In short, if others depend on your income to support themselves, you should think hard about life insurance.

Even if you don't have any of these needs right away, you may want to consider buying a small "starter" policy, if you hope to have one in the future. The reason: the younger you are, the cheaper life insurance is.

Determine how much coverage you need

The amount of money your family or heirs will receive after your death is called death compensation. To determine the appropriate amount of life insurance, online calculators can be helpful. You can also get a soccer field look using any number of formulas. The simplest way is to take your annual salary and multiply it by 8.

A more detailed method is to add up the monthly expenses your family will incur after your death. Remember to include one-time death expenses and ongoing expenses, such as a mortgage or school bills. Take current expenses and divide by .07. This indicates that you want a lump sum of money that you will earn about 7% each year to pay for these ongoing expenses. Add to this amount the money you will need to cover one-time expenses and you have a rough estimate of how much life insurance you need.

As useful as calculators and rough estimates, there are some things that are not.

They cannot give you any final answers. Calculators only allow you to implement 'hypotheses', recalculate, and generate new results while making and entering new assumptions. However, using these tools and learning about how life insurance and other financial products work can help you feel more comfortable discussing your needs with professionals like a New York Life agent.

You can use any number of planning tools to get an idea of ​​how much coverage you will need for your policy. Use our online calculator, for example, or use a formula to find out how much you need. It's easy to start by multiplying your annual income by the number of years left before your retirement benefits begin.

Find the right type of policy

Once you know how much coverage you will need, you can consider the best type of policy to meet your needs.

You have two main options: lifetime, for a cheaper premium, or permanent lifetime for more comprehensive coverage that can add cash value. But you have many options to explore.

Look at the quality of the supplier

An insurance policy is only as good as the company that backs it.

You want to make sure you choose a company that you can count on to exist as long as you need your coverage, and a company that invests premiums in a very prudent way to pay your policyholders' claims.

Consult a financial professional

A financial professional can help you consider your finances, your needs, and the needs of your family.

Increase your vocabulary

Life insurance can be confusing as it uses terms like 'premium', 'dividend', 'beneficiary' and more.