These days you can buy just about anything online—and many of us do so with gusto. According to one e-commerce market forecast, experts predict the number of U.S. online shoppers will grow to 175 million by 2016. While many are purchasing airline tickets, books, movies, electronics, clothing and home goods, some are buying financial products—including life insurance. But before you join them, consider these reasons to talk to your insurance professional first.
The Choices are Complex
In general, life insurance comes in two basic forms: whole life and term. Insurers sometimes refer to whole life policies as “permanent insurance” because they combine insurance coverage with an investment fund. The policy will pay your beneficiaries a fixed amount when you die, but part of your premium will also go into investments that can build cash value. You can then borrow against the cash accumulated in the investment fund.
Term insurance is a life insurance policy without the investment component. When you purchase term insurance, you’re buying coverage for a set period of time. Some term policies renew annually, and their premiums will steadily increase along with your age. Other term policies have fixed premiums for anywhere from five to 30 years.
But your options don’t stop there. Universal life is term insurance combined with a money-market investment that pays a market rate of return. Variable life and variable universal life combine an insurance policy with investment funds tied to stocks or bonds.
The Right One Depends on Many Factors
Picking the right insurance product for your needs requires you to consider a number of factors. You’ll need to determine the amount of coverage you want to buy, the maximum premium you can afford, your age, the ages of your beneficiaries, and more. Unfortunately, this process is more complex than what most online computer models can handle—which means you’re likely to find one-size-fits-all policies that are too big or too small but never just right.
For a policy tailored to your precise needs, one that integrates with your overall financial plan, your local insurance agent is really the only option. Not only will you find the best selection of products (online clearing houses often offer term life insurance alone), but you’ll also benefit from your agent’s training and expertise. This means he’ll help you avoid buying too much coverage or a policy you don’t need and can even create a custom blended package using more than one type of life insurance product.
The Internet is definitely convenient, and you can use it to explore your insurance options ahead of time—as you might when buying a car. But when it comes to making a final selection and submitting an application, talk to your insurance professional first.