Choosing which life insurance plan is best for you can be tricky. There are different types – some have time limits, allow you to access cash while living, or can be sold to another company – so working with a life insurance agent who will take the time to answer your questions is the best way to get the perfect-fit option for you and your family. To avoid overpaying or causing your family financial hardships by not understanding the policy, ask these three questions of your life insurance agent.
What type of life insurance agent are you?
There are two types of life insurance agents.
- Independent agent: Independent agents work with a variety of companies to determine the best policy and rates for your needs.
- Captive agent: A captive agent works for one company and only offers services from that provider.
Working with an agent who has access to a number of companies may save you some cash. When your agent can compare the same type of policy across different providers, you can rest assured you’re getting the coverage you want at the best rate possible.
How do you determine my needs?
There are a number of factors to consider to determine how much life insurance coverage you need. Plan for a policy that covers at least five years of your annual salary, and in some situations, up to 10 times your yearly income is ideal.
However, not everyone falls within this general rule, so ask your life insurance agent the amount of coverage you need and how that’s determined. Consider the financial needs of your family if you were to pass. Some expenses are straight forward, but others will vary based on your life position.
- Funeral expenses
- Income replacement (you decide the number of years)
- Future financial commitments: college, retirement, donations
Walk through these expenses with your life insurance agent to determine your coverage needs.
What benefits come with the policy?
Added benefits – known as riders – come with policies. Some riders come at a cost while others are implicit with the policy. Examples include:
- Accelerated death benefit rider: You can access cash from your death benefits to pay current medical bills if you’re diagnosed with a terminal illness and have less than two years to live.
- Conversion rider: A conversion rider lets you convert your term policy to a permanent policy without proof you’re still insurable. This benefit helps if you’re hit with a health challenge that would make it hard to get life insurance coverage.
- Guaranteed insurability rider: Buy extra coverage at set intervals without proving you are insurable.
- Waiver of premium rider: The insurance provider continues coverage without requiring further premium payments if you are permanently disabled.
Ask if the policy offered to you comes with an option for these riders, or others. If not, keep shopping until you find a provider that offers what you need.
Your life insurance agent should be focused on your specific needs, not trying to force you into a one-size-fits all coverage plan. An experienced agent educates you on your options so you know you’re making the best choice for your family and their financial future.