Many Arkansans know they need a life insurance policy. No one wants to leave loved ones with funeral expenses, and many of us have others who depend on our income. We know that our deaths would be financially as well as emotionally devastating for our families.
But many of us put off getting life insurance. Maybe the process seems daunting or confusing, and we don’t know where to start. The truth is, getting life insurance is not as complicated or difficult as you may think. Here’s a quick how-to, to guide you through this process.
Figure Out How Much Life Insurance You Need
This may be the hardest part of the whole process. But we’ve broken it down to a fairly simple formula.
- Have you considered your burial arrangements? If you want to be buried, add $15,000. Earmark $5,000 for a cremation.
- Total all your debt, including credit card debt, car notes, mortgages, and student loans.
- Which of your dependents is the youngest, or will need your financial support the longest? How many more years do you expect this person to need your financial support? Multiply the number of years by your annual salary. Now add an additional year’s salary, to account for inflation. Total that number.
- Do you expect to fund higher education for any of your dependents? If so, add $100,000 for every university degree.
- Do you have pets? Estimate how much each pet costs per year, and multiply that total by the number of years you expect that pet to live. Total the number for all your pets.
- Now, add all five of these numbers together. You need a life insurance policy that covers this final sum.
Talk to An Agent About Whole Life Versus Term Life
Term Life Insurance may be the more affordable option for you. If your dependents will only need your financial support for a few more years, this may be the way you want to go. However, Term Life Insurance only covers you for a specific number of years.
Once the term is up, your policy may be convertible to a Whole Life policy. Whole Life Insurance pays death benefits without certain term limitations. It builds cash value, which the policyholder can draw or borrow against throughout their lifetime. This insurance typically requires a medical exam to procure. The initial premiums are high, but over the course of a lifetime, this policy may be a better value.
Apply for Life Insurance
First off, you’ll need to collect certain documents. You’ll need your driver’s license, passport, birth certificate or green card. You’ll also need proof of income, such as a pay stub, a tax return, or an earning statement from your bank. A mortgage statement or lease will meet your proof of residency requirement. These documents will help you complete the application and answer questions during the initial phone interview.
You may be asked to see a doctor, depending on your particular situation and the type of policy you want. You can schedule a general exam and sign a disclosure that allows your provider to share your health information with your insurance company. Now your part is mostly done. It may take a few weeks for your policy to be underwritten. During this time, your insurance company will assign a health/risk rating to your policy, to figure out what risk level insuring you represents. Then your policy is written, you sign the documents, and you’re done!
Have more questions?
A Farm Bureau Insurance of Arkansas agent will be happy to answer them. Get in touch today!