5 Questions to Ask Before Buying Life Insurance

Choosing a life insurance policy is one of the most important financial decisions you'll make for your family. To ensure you're making the right choice, it's essential to be informed. Here are five critical questions to ask your financial advisor before signing on the dotted line.

1. How much coverage do I really need?

This isn't a one-size-fits-all answer. Your coverage needs depend on your income, debts (like a mortgage), future obligations (like college tuition for your kids), and your family's lifestyle. A common rule of thumb is 10-12 times your annual income, but a detailed needs analysis is always better.

2. What's the difference between Term and Permanent Life Insurance?

Term life insurance covers you for a specific period (e.g., 20 or 30 years) and is generally more affordable. It's great for covering needs that have an end date, like a mortgage. Permanent life insurance, such as Whole Life or IUL, provides lifelong coverage and includes a cash value component that can grow over time. It's more expensive but offers more long-term benefits.

3. What are "riders" and which ones should I consider?

Riders are optional add-ons that can enhance your policy. Common riders include an Accelerated Death Benefit (allows you to access funds if you're terminally ill), Waiver of Premium (pauses your premiums if you become disabled), and a Child Rider (provides a small amount of coverage for your children).

4. How does my health and lifestyle affect my premium?

Insurers will look at your age, health history, family medical history, weight, and lifestyle choices like smoking or high-risk hobbies. Being in good health and living a low-risk lifestyle will get you the best rates. It's crucial to be honest on your application.

5. Can I adjust my policy in the future?

Life changes. You might get married, have children, or get a raise. Some policies, especially term policies, have a conversion option that allows you to convert to a permanent policy without another medical exam. Understanding your policy's flexibility is key to making it work for you long-term.