Buying life insurance for the first time is undoubtedly a daunting task. It can be a decisive purchase that makes the difference between whether your loved ones will struggle financially or be able to live a similar lifestyle while they grieve. Unfortunately, life insurance is a very complex subject, and as a result it’s easy to make a critical mistake during the purchasing process if you’re not well informed.  Knowing the basics of life insurance will help you make a good decision.
 1. If someone relies on you financially, life insurance is a necessity:
Having a spouse, children, or being a child of dependent parents makes life insurance an essential investment. Life insurance protection will provide those that depend on you with financial support to help to pay off any mortgage payments and other debt you have left behind, cover them for lost income, and help pay for your burial/final expenses.
2. There are four roles involved in a life insurance policy:
These are the insurer, the owner, the insured, and the beneficiary. The insurer is the insurance company from which you purchased life insurance. The owner is the person who purchased the policy and is responsible for premium payments. The insured is the person whose life is insured under the policy, and the beneficiary is who receives the death benefit when the insured passes away.
3. The difference between term and whole life:
Term life insurance, as the name suggests, is life insurance that’s purchased for a specific amount of time. Premiums are payed for the length of the term and then once the term is over, the death benefit is gone. There is also no cash value aspect to term life insurance so your premium is used only to keep the policy alive, resulting in term life being significantly less expensive than whole life.
Whole life provides insurance for the life of the insured. You have a guaranteed premium, interest rate, and death benefit as well as a cash value component. The cash value component is essentially a cash account in the policy, which can be used to pay premiums. As a result, whole life is significantly more expensive than term life insurance, but may be the better option depending on your situation. It’s important to talk to your agent to figure what type of policy will work best for you.
4. The longer you wait, the more expensive it gets:
The younger you are when you purchase life insurance, the less costly your premiums will be. Also, let’s say you do wait and a health problem arises, you will likely now be paying higher premiums or be denied coverage all together.
5. You shouldn’t count on your employer’s insurance alone:
Many employers will offer their employees between one and three years’ salary as a death benefit, which is not enough for most families. It is recommended that your death benefit is in the range of five to ten times your yearly salary. Furthermore, if you quit or get laid off, you will be left with zero coverage. Having your own policy is a much safer option.
6. There are several different factors that determine the price of life insurance:
As mentioned earlier, life insurance gets more expensive the older you are. There are also several other factors that can affect your rates, such as: gender, smoking vs. non-smoking, health, lifestyle/hobbies, driving record, and family medical history.
7. For a life insurance policy to pay a benefit, every premium must be paid in full:
If the owner of the policy stops paying premiums, the policy will lapse and all the money that has been put into it will be wasted. Statistics show that one in every four permanent policyholders stop paying premiums within the first three years of owning their policy.
8. Failing to disclose information about your health can result in a cancelled policy:
It’s essential to give full and accurate information when applying for life insurance coverage. If you fail to mention something, such as the fact that you’re a smoker, you could be given a higher premium or be denied a policy all together. Why it’s even more important is that if you have misrepresented information on your insurance application and you pass away, your beneficiaries may not receive any death benefit at all. As with life, honesty is the best policy when it comes to life insurance.
9. About the suicide clause:
This provision of a life insurance policy states that death benefits will not be granted for the insured’s beneficiaries if he commits suicide within a specified term following the purchase of a policy, usually two years.  The purpose of the suicide clause is to protect the insurer against the circumstance that the insured commits suicide to give his beneficiaries a significant amount of money from life insurance claims. It’s important to note that every time a new policy is purchased, even if it’s from the same company, the two year period restarts.