Life insurance policies are a critical element of a family’s financial plan. Selecting the right policy ensures your family’s well-being should the unexpected take place.
How can you protect your family’s financial future without breaking the bank? We’ve put together this list of five tips for selecting insurance policies that provide both affordability and protection for your family’s future.
Tips for Purchasing Life Insurance
#1. Don't fall into the life insurance myth trap. Common knowledge about life insurance is rife with erroneous assumptions such as: 1) "I'm too young to need it," or 2) "We don't need life insurance until we have children." Life insurance policies are more affordable the younger you are, and while young married couples may not yet have children, the death of a spouse may significantly affect the standard of living of the surviving spouse.
#2. Determine your current and future needs. These will undoubtedly evolve over the years, and there are many factors to consider. A young physician with a growing family and student loans just opening up a new practice will likely need a greater amount of insurance to cover personal debts, business expenses, and family living costs. A more established physician toward the end of his career with substantial retirement savings, paid-off home, and graduated children may no longer need as much life insurance.
#3. Choose between term and permanent life insurance. Term life insurance is usually offered in 10, 20, or 30-year terms and only pays if the policyholder dies within the term. Premiums are based on age at the time of application and tend to be lower for healthier individuals.
Permanent life insurance policies do not expire as long as the premiums are paid and the policy remains in force, and pay upon the death of the insured, whenever that occurs. They can also serve as an investment vehicle, building cash value, like a savings account. Permanent life policies are well-suited for established physicians in sound financial health who may be looking for additional ways to shelter income from taxes, from creditors and lawsuits, and for estate planning purposes.
#4. Use an online life insurance calculator. Policyholders should track their monthly income and existing debt, accounting for future expenditures. A life insurance calculator can help you start to determine your costs and coverage. One caveat: Many don’t account for all your expenses, so be sure to consider any hidden costs. For example, what if your stay-at-home spouse -- rather than your main earner -- passes away unexpectedly? Now your family may have expenses not be reflected in results of an online calculator.
#5. Go with a highly rated insurance company. Purchase your policy from a reputable life insurance organization -- one that has a track record for financial responsibility and stellar service. Verify a company’s ratings with agencies such as Standards & Poors, Moodys Investor's Services and A.M. Best Company. A quick review of the company’s website and other research can help give you a sense of the stability of the organization.
By staying on top of your lifetime financial needs and seeking professional guidance for help with choosing a life insurance policy for you and your family, you’ll be poised to secure a policy that does what you need it to do when the time comes. Choosing a life insurance policy is one of the most impactful and important steps a physician can take toward financial stability. Contact one of our insurance advisors today to start a life insurance conversation.
