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5 smart ways to buy life insurance

Life insurance often helps people gain a form of financial protection and peace of mind. Getty Images/iStockphoto

While thinking about death isn't always the most pleasant topic, it's important to consider what would happen to your loved ones when you pass away, especially if it happens sooner than expected. That's where life insurance comes in.

Buying a life insurance policy can help provide financial security to your family, such as by covering educational expenses for your children if you pass away before they finish school. Or, you might want to pass on money to a charity and see life insurance as a good vehicle to do so.

Whatever your exact reasons might be, life insurance often helps people gain a form of financial protection and peace of mind. But policies can vary significantly in terms of how much protection they provide and how they work. 

If you're in the market for life insurance then start by getting a free price estimate now so you know exactly what to expect.

5 smart ways to buy life insurance

Not sure where to begin? Consider the following five smart ways to buy life insurance.

Step 1: Determine your needs

The first step for buying life insurance is to figure out what you're trying to accomplish by purchasing a policy.

If you're just looking to pass on a small amount of savings to your children, for example, you might find that you're better off setting up your own savings account. But if you're trying to protect against larger issues that you can't accomplish via savings, like covering your spouse's and kids' living expenses for several years in case you pass away, then you might decide to take out an insurance policy.

Your needs around the value of insurance coverage, length of coverage, and ability to access coverage (e.g., some policies let you access some of your death benefits while still alive, such as in the event of a critical illness) can all affect your purchase of life insurance.

Step 2: Know your budget

The next step is to see how your budget compares with the coverage you're looking to buy. Life insurance premiums can vary widely based on factors like your age and health but also based on levers you can control, like coverage limits and length.

So, if you know you can only afford $40/month in life insurance premiums as opposed to, say, $100/month, then that will often change the type of coverage you look for. Keep in mind, however, that you might have some flexibility in your budget based on what life insurance can provide.

For example, you might be willing to pay a little more in whole life insurance premiums rather than setting aside money in a savings account each month. Others, however, would prefer to set a lower insurance budget and use extra money elsewhere, so they might go with a term life insurance policy.

Not sure how much these policies would cost? Get a free price quote online now.

Step 3: Pick the type/right amount

Depending on your budget and needs, you can choose the right type and amount of life insurance for your circumstances. As mentioned, for example, you might be deciding between whole life insurance vs. term life insurance.

If your needs mainly include protecting against your loss of income if you pass away while your kids are relatively young, for example, then you might choose a term policy. After, say, 10 or 20 years, you might be okay with coverage expiring.

Others, however, want whole life coverage. That can increase costs, but you might be willing to pay higher premiums for the peace of mind that can come with lifetime coverage. 

For example, you might like the idea of not having to re-qualify for life insurance after a term policy expires. So, you might choose a whole life insurance policy from the get-go. Or, you might use options like converting a term policy to a permanent one, which many insurers offer.

Step 4: Shop around

Once you have a good sense of what life insurance you want to buy and how much you can afford, you can go deeper by shopping around. Not only might you want to compare different types of insurance policies (e.g., whole vs. term life insurance), but you might want to see how policy details and costs differ among various life insurance companies.  

Much like shopping around for different car insurance policies for the best rates, for example, you can shop life insurance providers online to see who can give you the best mix of affordable premiums and quality coverage. Use the table below to get started.

Step 5: Buy policy, add beneficiaries

If you find a good deal on life insurance that you want to purchase, you can go forward with actually buying the policy. In many cases, doing so then requires getting a medical exam to get approved. However, no-exam life insurance policies do exist, they just tend to cost more.

When finalizing a life insurance purchase, you'll also add your beneficiaries, such as your spouse and children. This step is critical, because if you don't add the right information, then your life insurance might not pay out to those who you're looking to protect, or it could become complicated for them to make claims.

You can add multiple beneficiaries, and you can also add contingent beneficiaries in case your first choices pass away before being able to make claims. 

Following these five steps can help you buy life insurance that's right for your situation. There can be many nuances to weigh, however, so don't feel like you have to rush. Take your time to explore your options and see if there's a particular life insurance policy that makes sense for you.

Start by getting a free price estimate online now.

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