Buying life insurance for the first time?

6 Things to consider when buying life insurance. 

1. Why you need life insurance? 

Most of us need life insurance at some point in our lives. But don't buy a policy just because you heard it was a good idea. Life insurance is designed to provide your family with financial security in case you, your spouse, or a parent passes away.

Life insurance can help pay off your mortgage, help with college expenses, help fund your retirement, and help with estate planning. If you have loved ones who depend on your income for support, you should strongly consider getting life insurance. Also, the younger you are, the less expensive life insurance will be, so even if you don't have an immediate need you may want to consider purchasing a "starter" policy for the future.

2. How much coverage should I buy?

• You can use any number of planning tools to get an idea of the amount of coverage you'll need for your policy. The easiest way is to simply take your annual salary and multiply by eight.
• Another way: Multiply your annual income by the number of years left before your retirement benefits kick in.
• You can also add up the expenses you think your family will incur after your death, such as a mortgage, school bills, and car costs. Then take your ongoing yearly expenses and divide them by 0.07. That translates to you needing a lump sum of money earning approximately 7% each year to pay those ongoing expenses. Add to that amount the money you'll need to cover one-time expenses at death, and you'll have a rough estimate of the amount of life insurance you need.
• And of course, you can also use our life insurance calculator to help you determine how much protection you may need.

As useful as calculators and rough estimates are, they cannot provide you with final answers. Calculators only allow you to perform "hypotheticals," recalculating and generating new results as you make and input new assumptions. 

Using these tools and educating yourself on the workings of life insurance and other financial products, however, can help you feel more comfortable when discussing your needs with a financial professional like a New York Life agent.

3. Finding the right life insurance policy. 

Once you figure out how much coverage you'll need, you’ll need to find the best insurance policy. Your main options are term life, which  may better fit your current budget, or whole life, for permanent coverage that also grows cash value.

Consider term life for:

• Death benefit protection without cash value accumulation.
• Life insurance on a limited budget.
• Ability to convert to long-term life insurance.

Consider whole life for:

• Long-term death benefit protection.
• Stable cash value accumulation.
• Potential to receive dividends.

4. Check out the insurance provider. 

An insurance policy is only as good as the company that backs it, so make sure you choose a company you can rely on to be around for as long as you'll need your coverage, and one that is highly prudent and financially strong in order to ensure that the claims of its policyholders can be paid.

New York Life Insurance Company is one of the largest mutual life insurance companies in the world.¹ Being mutual means our primary focus is on creating long-term financial safety and stability for our policy owners.

5. Consult a financial professional.

A financial professional can help you factor in your financial considerations, your needs, and your family's needs. Ask your financial professional about any aspect of a financial policy or product that is not clear to you. Review your insurance coverage with your financial professional on a regular basis to ensure that the coverage is keeping up with changes in your needs and income.

6. Know the lingo. 

With terms like "premium," "dividend," "beneficiary," and so on, understanding how life insurance works can be confusing. To help you understand this whole process, we have put together a glossary of insurance terms to help you understand this process.