Challenges lie in determining life insurance needs

Determining how much and what kind of life insurance to buy can be difficult, but the Missouri Department of Insurance, Financial Institutions and Professional Registration is working to help consumers navigate coverage options.

“Two keys to buying life insurance are never to buy more or less than you need, and buy sooner than later,” said DIFP Director Dale Finke, in a news release. “Buying too much life insurance results in paying high premiums and buying too little can result in insufficient funds for dependents. Buying insurance now rather than later saves you money in the long run because the younger you are when you buy the policy, the lower the premium will be in the future.”

To better understand how much life insurance is needed, the Missouri DIFP suggests asking these questions:

• If I were to die unexpectedly, how much money would my family need for immediate expenses (i.e. funeral expenses)?

• How much money will my dependents need to maintain the same standard of living (i.e. cost of living – food, clothing, transportation)?

• What long-term debts do I not want my family to have to take care of, such as a mortgage or other loans?

• What future expenses – college or long-term care – will my family members face?

After answering these questions, it is important to seek information from a qualified life insurance professional. The more information shared in regard to income, debts and investments, the easier it will be for the insurance professional to recommend options.

When it’s time to make a purchase, DIFP offers these tips:

1. Protect your loved ones. Life insurance protects your survivors from financial hardships when you die. Life insurance is not an investment. Beware of agents who want to sell you more insurance than you need.

2. Bring a friend. Ask a family member or trusted friend with some knowledge of finances to join you at a meeting with an agent. This is especially important for the elderly.

Most insurance agents are honest, but another person may discourage a dishonest agent from crossing the line.

3. Take notes. If you are unable to have someone listen to the sales pitch with you, ask agents to write their statements down and sign and date them. If what they’re pitching is true, they will be willing to stand by their presentation.

4. Beware of high-pressure sales. You have many competitive choices to choose from, so shop around. Don’t buy on impulse.

Some insurance agents are trained to “close the deal,” but don’t be pressured to make a quick decision.

5. Understand the policy. Is it a whole life policy in which premiums and death benefits never change? Is it a variable product that places a portion of your premium into the stock market? Is it a term life policy? If so, what is the term of the product?

6. Check your agent. Call the Missouri Department of Insurance, Financial Institutions & Professional Registration at (800) 726-7390 to find out whether the company and agent are licensed and whether any consumer complaints have been filed against them.

7. Shop around. Talk to your parents or family members and get a second opinion. Most excessive or unsuitable sales are discovered afterward by a family member.

8. Watch your money. Never make a check payable to the agent. Payments should always be made to the company.

9. Think about your choice. Take the 10-day cooling off period provided by your policy to review it and ensure it is what you thought you were purchasing. You have 10 days to return it for a full refund. If you were pressured or just changed your mind, cancel.

10. Get organized. Keep all information on your policies together. Your insurance companies may be bought or sold during the policy period or your agent may have moved away. By keeping your records together, family members will be able to locate them and stay abreast of the most current information. Consumers often contact the DIFP after a death because they cannot find current company names for policies.