This a guest post from Susan Wells in which she lends a different and useful perspective on insurance literacy and thanks Susan for the great information:
Steps in Financial Literacy: 3 Tips for First Time Life Insurance Buyers
April is recognized in the United States as National Financial Literacy Month. In an effort to illuminate the importance of financial literacy and teach Americans how to make responsible financial choices, National Financial Literacy Month is advocated by many of the country’s financial institutions and nonprofit financial educational organizations. Though April has quickly come to a close this year, financial education and financial literacy remain ever more important pursuits year-round. One area of financial responsibility that many people throughout the country can use guidance with is life insurance policies and practices. Life insurance can be an area of our personal finance that goes often overlooked. However, it is essential that we carefully educate ourselves on the life insurance process so that we as educated individuals can get the most fitting policy at the lowest premium. Use these few tips to better educate yourself on the process of finding and purchasing life insurance so that you can make wise financial decisions for yourself.
Know Your Needs
One of the most difficult aspects of choosing a life insurance policy is really understanding exactly what you need. There is no one out there that knows your personal financial situation better than you do—don’t let someone (regardless of how knowledgeable they are) tell you what you need. Advisors can be an extremely useful resource for first time life insurance buyers, but you want to make sure you educate yourself carefully on the topic first. Going to an advisor without any prior knowledge on life insurance and how it works can be the perfect set up for disaster. Gain a careful understanding of your insurance needs. Though it’s a morbid process, it’s wise to add together your total debt, estimated funeral costs, and six months to a year of income replacement. Knowing your total financial policy can help you select the right insurance policy. While life insurance representatives are there to offer guidance, they are nonetheless sales representatives. They are trained to sell large policies. Understand your true needs to better pinpoint what types of policies and premiums are appropriate for your specific situation.
Understand How Your Advisor Works
As mentioned earlier, life insurance advisors can become a very useful resource in your policy purchasing process. With extended knowledge on life insurance policies, how they work, and what various premiums are available, advisors can be extremely useful. But you should, of course, choose your advisor wisely. Advisors receive compensation for the advice they provide you depending on the type of firm or organization they work for. Before you devote yourself to a single advisor, you should learn how that individual is compensated. Just as you would with a general financial advisor, you should find out what motivates your life insurance advisor’s suggestions. Are they compensated through commission, fees, or both fee and commission? Conflicts of interest can occur when an advisor’s pay is based on commission. This is something you should consider carefully when seeking advice from professionals. It is also a good idea to speak with an independent broker when you are “interviewing” life insurance advisors. Independent brokers have access to more products than just one single firm can provide. An independent broker may be able to offer you more options than one locked into a specific company. The key to finding the best deal is approaching potential advisors educated on the process and inquisitive about their practices.
Ask Tough Questions
While you should approach an advisor after you have already done some preliminary research into life insurance policies and your best options, that does not mean that you will not have any questions for the professionals. Don’t be afraid to ask an advisor for guidance and explanations to things you might not understand completely or feel less confident about. As an advisor should, they are there to help you make the best choices for yourself. Let them show you exactly all they know. Ask as much as you can about the policies they are offering. You should know the product from top to bottom before you settle on it. How long are premiums guaranteed for? What are the policy riders? Is there a conversion option? Is there a modal premium fee? These are the types of educated and specific questions that your advisor should be able to easily answer and you should want to know. Coming up with the right questions to ask an advisor depends entirely on being wholly educated on life insurance policies and practices. Go in to the process as an educated consumer so that you can find the best deals and packages for your own personal needs.
This is a guest post by Susan Wells. Susan is from insurance quote guide, she writes on topics including health/car/life insurance, mortgage, real estate
Tony Steuer, CLU
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance