Insurance Best Practices
Be Sure When You Insure
Tips on Purchasing Life
Insurance
By Nick Castro
In terms of personal
pleasure, buying life insurance is not in the same
category as getting a new car or a spring wardrobe. It
is a lot more complex and infinitely more important. The
primary reason individuals purchase life insurance is to
protect the financial security of their loved ones. It
makes good sense then to use the same care in buying
life insurance as you would when making any significant
purchase. And whether you are looking for a new home or
a state-of-the-art stereo system, shopping around for
the product that best meets your needs is of utmost
importance. Life insurance is no exception.
Before you begin your search for a life insurance
policy, it is important to do some preparation. To help
you determine the amount of insurance you need, you
should identify your dependents (this may include
children, parents, spouse), your financial obligations
and your resources. This way, in the event of your
death, your family will have the financial resources it
needs to continue to run a household. A company
representative or agent can help you find the right type
and amount of insurance for your family's needs at an
affordable price.
In addition, here are 10 things you should do to help
you and your family make the most appropriate life
insurance purchase:
1. Make sure your agent and company are licensed to do
business in your state. Call your state insurance
department if you are not sure.
2. Take your time. On the other hand, do not put off an
important decision that protects your family. Make sure
you understand fully any policy you are considering and
that you are comfortable with the company, agent and
product. Do not rush into a decision just because you
are feeling pressured.
3. Ask your agent if the company offers any “healthy
lifestyle” discounts on your policy. For example,
non-smokers can save from 10 percent to 20 percent on
their premiums.
4. Do not omit any part of your medical history on your
life insurance application. If you do, the company may
be able to refuse coverage, deny a claim or cancel the
policy.
5. Read the insurance contract carefully and, if
necessary, ask your agent for a point-by-point
explanation of the language. Insurance policies are
legal documents and you should be familiar with what
they promise, even though some technical terms are used.
6. Expect delivery of your life insurance policy within
approximately three months. If it does not arrive,
contact the company for a written explanation.
7. Remember that you have a 10-day “free-look” period
that entitles you to change your mind about purchasing
the policy. If you do so, the company will return your
premium, without penalty.
8. Write the check for your insurance premium to the
company, not the agent. Be sure you are given a receipt.
Pay premiums annually or semiannually, rather than
monthly or quarterly, if possible. That way, the company
saves money by billing you less frequently, and the
savings are passed on to you.
9. Inform your beneficiaries about the kind, amount and
location of any life insurance policies you own. Keep
your policy in a safe place at home and, in addition,
keep your insurance company's name and your policy
number in a safe deposit box.
10. Review your life insurance coverage at least once
every two years to be sure it meets your current needs.
Be cautious if another agent or company contacts you and
wants you to cancel your current policy to buy a new
one. Contact your original agent or company before
making any decisions.
All things considered, when you are purchasing life
insurance, shop carefully, ask questions, and make sure
you understand the answers. You would do the same with
any other product or service that you buy.
Nick Castro is a Financial Representative with the
Northwestern Mutual Financial Network based in Tampa,
Florida for The Northwestern Mutual Life Insurance
Company, Milwaukee, Wisconsin.
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