Congratulations! You have completed your education and are ready to begin in a new field of work or perhaps making a career advancement.
Buying individual life insurance may not be the first thing that you put on the list as a recent graduate, but it should be near the top. This article gives you five tips on purchasing life insurance for the first time, and why it is so important to start early on planning your future.
1. Buy early
It may seem counterintuitive starting out in life and a new career to consider buying life insurance, but it may be the best time to purchase! If you purchase whole life insurance, you can lock in rates for life and regardless of any future health condition, your rates won’t go up.
Insurance companies sell their life insurance based on risk analysis. Premium rates are lower for people who are in their twenties because mortality rates are lower compared to people in their fifties or sixties.
Buying life insurance out of college is a great way to begin a good habit. If you have a premium deducted from your earnings each month, it may feel like a pinch in the beginning, but as your earnings increase, you will be thrilled you are building cash value and a death benefit as future protection for a spouse and family.
Whole life, variable life, and universal life insurance all have a built-in cash value. This cash-value builds, and you can borrow against the policy in case of emergency or withdraw cash for other reasons. However, if you do not replenish the amount of cash you withdrew or borrowed, there is less cash available for the death benefit.
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Buying life insurance out of college is a great way to begin a good habit.
2. Buy the right amount of coverage
Buying the right amount of coverage with a life insurance policy is important. Buying within your budget while also looking toward future needs can be difficult to assess.
With a licensed life insurance agent, you can explore the different amounts of coverage you need now and possibly in the future. If you buy too much and compromise your budget, you might be tempted to drop it all together.
And if you want more coverage later, you may be able to increase the death benefit amount.
3. Compare types of life insurance policies
There are several types of life insurance available, but the most common are whole life insurance and term insurance.
Whole life insurance or permanent life insurance policies offer cash value accumulation and death benefits. So does universal life insurance. Universal life insurance is a type of whole or permanent life insurance that has many of the same benefits a whole life insurance has, but it has a flexible premium allowing you to raise or lower premiums. 1
Term life insurance does not offer a cash value benefit. It is only a death benefit.
Term Life insurance usually costs less than whole life insurance for the same amount of coverage. Term life, as the name implies, only last for a period of time. When that term is up, you will have to buy new insurance, and possibly at a higher rate.
4. Commit to yourself and your future dependents
It may be hard to grasp currently how important paying lower premiums benefits you in the long run. Keep committing to building financial protection for your family and loved ones for the future. The results can save you money in the long run rather than buying an insurance policy later in life.
Imagine the life insurance policy you choose today is like a small sapling tree. Plant and water it now, and it may grow large enough to cover and protect you and your family in the future at a lower rate and more savings.
Buying life insurance is a big step. You want to ensure you have good advice and a good policy to take into your future.
Find a life insurance company with a financial rating of an A (Excellent). Each year, independent financial institutions such as A.M. Best, Standard and Poor’s, Fitch, and the Better Business Bureau rate insurance companies for their operating performance, favorable business profile, and risk management.2
5. Talk with a professional
Be sure that the agent you are speaking with has been licensed in your state.
A professional life insurance agent will compare life insurance products, discuss the benefits of each one, and give you information which can help you decide.
Your new place of employment will most likely have employee benefits, which may include term life insurance.
If you think the term life insurance offered by your employer is not enough, it’s a good idea to talk with a licensed agent about securing an individual life insurance policy. Regardless of where you work, having your own individual life insurance policy helps you better prepare for your loved ones and the future.