Although using an agent or insurance broker to buy life insurance policy is a good idea. However, it could backfire sometimes. Hiring an insurance broker has its downsides, some of which include-:
- Commission comes first-: Even though insurance agents want to ‘help’ you, they are paid on commission, based on the sales they make and most of them are much more interested in raising their commissions than getting you the best insurance policy.
- They sell you what you don’t need-: In a bid to increase their earnings, insurance agents try to sell you policies you don’t need and they can be very convincing such that you wouldn’t have a choice but to comply.
- It costs you more money-: Buying insurance through a broker may also cost you more money than buying insurance yourself.
- It is risky-: You may run into the hands of unscrupulous insurance agents who would rip you off if you are not careful enough.
If you want to buy life insurance yourself without using an agent, there are ways to go about it. Some of the steps you should take include-:
How to Buy Life Insurance Wisely Without an Agent or a Broker
1. Determine your life insurance needs
First, you have to really sit down and decide on whether you really need life insurance or not and if you do, how much life insurance do you need? Life insurance is useful for you if you have dependents or family that you do not want to suffer when you are gone.
If something happens to you today for instance, and you have kids and a wife, you would want them to continue to have the same standard of living they had while you were around and that is one of the reasons why you should get life insurance cover
You could also benefit from the cash build-up of your life insurance policy if you ever get cash-strapped while you are still alive. To determine how much life insurance you should buy, this is what you should do-:
- Calculate how much you spend every year. This means the amount of money you spend on household expenses like feeding, clothing, maintenance, education, taxes, rents, mortgage and all other bills.
- Next, you should calculate how much income you have coming in. This includes all your salaries (you and your spouse), your benefits and all income from your investments.
- If you have existing debts that you are still servicing, you have to add that together too. These debts include mortgages, credit card debts and even car loans.
- Projected Expenses-: You should also figure out how much expenses are expected to be paid in the future. For instance, you should calculate your children’s college expenses, feeding allowance, funeral expenses and all other expenses that would be made in your absence.
When you have figured all of these out, you should add the expenses, the debts and the projected future expenses together and subtract the figure from the amount of debts you currently owe; that should give you an idea of how much life insurance you need. You could also deduct the value of assets that you currently own from this amount to further reduce the amount of life insurance you need.
2. Determine your life expectancy rate
Insurance agencies also make use of your life expectancy rates to determine how much life insurance you need to buy. If you were using an insurance broker; he/she would have been able to advise you on this but since you are not, you would need to figure out this yourself.
Life expectancy simply refers to an estimation of how long you are expected to remain alive putting some factors into consideration. Some of these factors include-:
- Eating habits
- Smoking habits
- Exercise and Sporting
- Nature of job
- Driving habits and skills
- Alcohol and drug use
- Sex
- Genetics
All these factors can increase or decrease life expectancy. For instance; if you are a smoker, consume alcohol, do not exercise and have a risky job like being a pilot or a scuba diver, you are expected to have a lower life expectancy rate compared to people who do not do any of these things.
3. Decide on whether you want Return of Premium Riders
Return of premium riders can help to protect you and help you get your money back in the event that you outlive your life insurance policy. If you obtain life insurance and you insurance policy expires before you die, you can get a refund of your premiums; tax-free.
4. Learn about the different types of life insurance
To be able to choose a suitable life insurance policy, you have to learn about the different types of life insurance policies and their benefits. The most common types of life insurance policies include-:
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Term Life Insurance
This type of life insurance policy does not have a cash value build-up. It offers protection for a specified period of time and the premium rates are lower than other types of life insurance policies.
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Whole life insurance
This type of insurance is designed to cover its holder throughout his life time. However, the premiums would continue to be paid all through the lifetime of the policyholder. The policy expires only after the death of the policyholder.
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Endowment Insurance Policies
Under this type of life insurance policy, the policyholder insures his life ad pays premiums for a specified period of time. If death occurs during the insurance term, the beneficiaries would get the assured sum but if it doesn’t, the policyholder gets back his premiums along with some other investment benefits.
5. Ask for insurance quotes
When you have decided on the type of life insurance policy that you want, the next step would be to ask for insurance quotes. Since you do not want to use an agent or a broker, you would have to approach the insurance company yourself.
Ensure that you use only reputable insurance companies. It doesn’t have to be the biggest insurance company as smaller companies offers good deals too but big or small; ensure that you review the terms, conditions, premium rates and customer reviews well before you buy a life insurance policy. You could also ask for quotes and compare rates on the internet.