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What are the Main Factors to Consider When Buying Life Insurance?

Jan 12, 2020 | Insurance

What are the Main Factors to Consider When Buying Life Insurance?

Life Insurance Factors

When it comes to go compare life insurance for the first time, it can be pretty confusing. There’s a lot of terminology to learn, there are different types of life insurance policies, etc.

We’ve put together some information to help you focus on the three main factors that are most important when it comes to buying life insurance.

One note – when filling out a life insurance application, be honest with your answers. Providing the insurance company with incorrect or false information is illegal. And when the insurer realizes the information is false, they will reject your application. If you’ve already been insured, then your life insurance policy will be invalidated if the information you provided was false.


1). Life Stage

Your life stage plays a crucial part when it comes to buying life insurance. What does life stage refer to? It means where you are in life right now. For instance, are you married, or do you have a partner? Do you have dependents? Are you employed? These are some of the questions covered under this topic.

Before you begin searching for the right type of life insurance policy, it’s important to take stock of your life stage. Areas to consider include the following:

  • Your age and health: younger people are able to purchase life insurance policies with lower premiums because of their youth and good health. However, the old you are, the hard it may be to buy life insurance and you’ll need to understand that insurance premiums will be higher.


The reason is because as you age, your health naturally becomes worse, which insurers see as a higher risk. As we age, chronic health issues become more common. And if you’re a smoker, your insurance application could be rejected, or you’ll face higher premiums. There’s also a higher chance they’ll have to pay out if you die, which (on the average) could be sooner than a younger person.


  • Marital status: if you’re married or have a life partner, then buying life insurance is a great way to make sure they’re taken care of after you pass away. Keep in mind that insurance is cheaper when you’re younger, and that life insurance can be more difficult to buy when you’re older and the premiums will be much higher.
  • Employment status: when it comes to occupation, insurance companies will ask to see if you are employed or not. They’ll also want to know if you’re a business owner with employees, or a freelancer, etc. Being a business owner with employees, life insurance is a smart investment. Your company and employees will be protected in case you die. Your business will continue, giving your staff the continuity, they need in their lives.



Another question important to insurers—is your occupation dangerous? For example, if you’re deep sea diver, insurance providers may see you as a high risk and reject your application as a result. They do have the right to do this.


  • Dependents: insurers will want to know how many you have and their situation in life. What does this mean? Let’s take a look:
  • When you think of dependents, your first thought may be your wife/partner and children. However, dependents can also be other family members you’re caring for or those who are somehow dependent on you for their support.
  • When it comes to their situation in life, this information includes their age, health, employment status, and if they have families, etc.
  • Your long-term life plans: are you planning to marry and have children? Will you start your own business? These are a couple of questions to consider before search for the right life insurance policy. You may want to consider a larger life insurance policy if you’re going have a family, start a business, etc. Keep in mind that the younger you are, the easier it is to purchase life insurance, and your premiums will also be lower.


2). Type of Life Insurance Policies:

Now you’re ready to review the different types of life insurance policies available. There are 2 basic types. Let’s take a look:

  • Term life insurance: this type of life insurance offers support for your beneficiaries only for a specific time period. This means that you bought a term life policy that was for 20 years, then your beneficiaries would only receive death benefits (the payout) if you die before the end of that time period. If you live longer, your loved ones will not receive any benefits. It’s also important to note this type of insurance does not have a cash value.


This might be a good policy for those who are older, and the premiums are more affordable. Make sure to buy the amount of coverage that would be needed to support your loved ones.

  • Permanent life insurance: this type of life insurance includes both the death benefit and cash value. While the insurance itself is not an investment, due to its cash value it can be used by you or your beneficiaries at some point in the future. You can think of this as a type of loan. For instance, if you’d like to pay your children’s college tuition, you can borrow the cash from your life insurance to pay for it.


It’s important to note that if you do borrow money against your account, and don’t repay the loan with interest, your death benefit will be reduced. If you surrender the policy, you’ll no longer have life insurance coverage.


As you age, the premium remains the same for as long as your life, and the death benefit is guaranteed. Plus, the cash value of your account grows at a guaranteed rate.


3). Length and Amount of Coverage

Next, you’ll need to consider the amount of protection needed to cover the expenses for your responsibilities and for the future of your loved ones (kids’ college tuition, weddings, etc.). You’ll need to calculate your expenses and then figure in the costs of the needs your loved ones will face.

It’s important to get enough coverage; while the premiums will be cheaper for lower coverage policies, you want to make sure your responsibilities are taken care of and your loved ones’ needs considered. Don’t be tempted by the cheaper policies – buy as much coverage as you can afford.

We hope this guide has helped to answer some of the basic questions you may have about life insurance policies. If you have additional questions, be sure to reach out to a professional insurance advisor. They’ll be able to help you find the best policy for your situation.

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