12 Best Life Insurance Tips

Looking to buy life insurance for the first time? If so, you're probably asking yourself questions such as "How much do I need?", "What kind of policy is best?" and "Which company should I buy from?" There's no question buying life insurance for the first time, like any other new experience, can be more than a bit daunting. Below are six important tips that we hope will make the process smoother, eliminating frustrating false starts and unnecessary bumps in the road.

1. Speak with an independent broker. These brokers will have access to many more products than just one firm can provide. When I worked as an independent broker, I was able to offer much more to my clients than just a company product.
2. Avoid one-meeting recommendations. If your broker makes a recommendation in the first meeting, you know that they have not really analyzed your situation and looked for best options. So just say, “No, thank you” and keep researching.
3. Understand how the advisor gets paid. Find out if they are compensated through commission, fee-plus-commission, or fee only. If there is any commission involved with the sale, make sure to look at all alternative products available. With commissions, the advisor may have a conflict of interest. Just because your advisor is commission-based doesn’t mean they are bad — just ask more questions with them. I always worked on 100% commission, but I would give my clients several options and disclose if I got paid differently.
4. Recognize that insurance is for protection — not investing. Term insurance provides protection only, without a savings component. Whole life and universal life policies have a savings component and are much more expensive. You are almost always better off just paying for term insurance, and using the cost savings to invest elsewhere.
5. Ask the tough questions. Don’t be afraid to ask the advisor questions. You should know the product inside out before buying it. Is the policy renewable and non-cancelable? How long are premiums guaranteed for? Is there an accidental death rider? What are the exclusions?
6. Watch out for “know-it-all” advisor. If the advisor answers all your questions without referring to anything, or pretends she “knows it all”, chances are that she does not. Insurance policies are complicated, and even the best advisors do not know every product 100 percent and may have to look things up. There is nothing wrong with that.
7. Compare similar products. When you price shop, make sure you compare similar products.
8. Don’t replace old whole-life policies. If you have had a whole-life policy for several years, try not to replace it. You may lose all the premiums you have paid. You may also have to pay new administration fees (if applicable), and reset some clauses (such as the suicide clause). If your situation has changed and you need more insurance, just buy more. (This warning does not apply to term life.)
9. Do not buy expensive riders. The advisor might ask you to add on all types of riders. Stay away from them unless you fully understand them and need them. Again, in training there was always an emphasis on selling riders. Often I didn’t see any benefits to the client.
10. Do your homework. Make sure you do your homework before purchasing an insurance product. Make sure it fits your needs and budget, and make sure you understand the contract. The advisor is obligated to explain it to you. Don’t sign until you understand the contract.
11. Take a 30-day free look. You have 30 days to look at the policy and understand it. If you are not satisfied with it during that time, cancel the policy and you will get your premium back.
12. Keep it simple. Do not make your insurance planning complicated. Because it is based on protecting your family, it should be based on your needs. Don’t fall for all the bells and whistles the company may try to sell to you.