Life Insurance 101

Load Up Your Tool Kit

Before talking with a life insurance specialist, collect this essential information.

Not sure how to start the conversation about buying life insurance? You’re not alone: According to the 2016 Amica Life Financial Peace of Mind Survey, 27 percent of Americans believe they’re not very knowledgeable about life insurance, and 21 percent say they haven’t purchased their own policy because they “don’t know where to start.”1

Thankfully, help is on your side. Life insurance specialists make it their business to explain the steps to take to help protect your family and loved ones. But before making that call, you should gather all the information that only you can bring to the table:

  1. Your assets, debts and other financial obligations
  2. Your family’s needs
  3. Your health status
  4. Your budget for life insurance

Know your needs

The amount of coverage you need depends on several factors, including how many dependents you have and your financial situation. The Amica Life needs calculator can give you an estimate based on your income, debts and other obligations. While the overall amount may surprise you, it’s based on your needs and can help provide financial security for your loved ones if you were to pass away.

“Some people see that number and think, ‘There’s no way I need that much.’ It may look like a lot of money, but it adds up pretty quickly,” said Todd Oster, assistant vice president with Amica Life.

To estimate your needs, you should have a good idea of how much money your family spends on daily living expenses, rent or a mortgage, college loans and contributions to retirement funds. Don’t forget to factor in other debts you may also have. Remember, no one knows more about your finances than you do.

Get a (medical) history lesson

Age and health affect life insurance premiums. The younger and healthier you are when you buy a policy, the lower your premiums are likely to be. “If you buy it when you’re young, you can get locked into a very reasonable rate,” Oster said.

To help your insurance specialist give you an accurate quote, provide as much information as you can about your health in your initial conversation.

Be prepared to answer these questions:

  • What medical conditions do you have?
  • Which prescriptions are you taking?
  • What’s your family medical history?

“You don’t want to give incomplete information and get a quote, only to find that the medical condition you have will raise your rate,” Oster said.

Make it fit your budget

Even though the cost of life insurance has come down in recent years, you may still struggle to afford the coverage you need. Be open to asking your life insurance agent about strategies that can make life insurance more reasonably priced for you. Some coverage is better than none. 

“You don’t want to give incomplete information and get a quote, only to find that the medical condition you have will raise your rate.” – Todd Oster, assistant vice president at Amica Life

“If you’re buying a car and can’t afford the one you want, you don’t say, ‘Forget it, I’m going to take the bus,’” Oster said.

For example, if you need a $1 million term life policy for 30 years but can’t afford it, consider a $1 million policy for 15 years instead. That initial coverage will help you get through your family’s peak expense years, when your children require the most care and you are carrying the highest mortgage. As your income rises, you can add coverage.

Keep the right company

Your relationship with a life insurance company can last decades, so make sure that yours is financially stable. It’s best to go with a company with a long, credible track record so you can be confident they’ll be around 10, 20 or 30 years down the road when your loved ones need them, Oster said.

A.M. Best rates life insurance companies for financial solvency. It’s to your benefit to seek out companies with at least an A rating. This indicates that they are financially stable and making sound investments, which means they’ll be there when you need them most.

Once you’ve loaded your tool kit with the basics, you’ll be ready to drill down into specifics. Contact an Amica life insurance specialist to learn how.

1 2016 Amica Life Financial Peace of Mind Survey, 2016.

ALIC36618 (exp. 12/19)

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