Carlton Financial Group - Insurance, IRAs, College Planning and more

Life insurance companies are pushing to sell coverage on-line is going to present a huge problem for consumers. Now, I understand buying car, home-owners, and liability insurance on-line, but not life insurance! For most people the term "life insurance" has several connotations that lead to a very grey area and without professional advise, you may have a false sense of security by being under insured.

If you are looking to purchase life insurance for the first time or you have life insurance and need to review your coverage, you will want to follow these simple steps to better understand the process to have certainty and piece of mind you are properly insured, after all, is that not why you buy it in the first place?

1. Understand why you need life insurance

While most people may need life insurance at some point in their life, they do not buy a policy just because it sounds like a good idea. Life insurance is designed to provide families with financial security in the event of the death of a spouse or parent. Life insurance can help replace lost income, fund a college education, inhance retirement and is a key element in estate planning. If others depend on your income for support, you need life insurance!

2. Determine how much should you buy

There are several ways to calculate the amount of life insurance you should have. Most calculations seem like a they were designed by insurance companies to help increase the amount you need, in turn, increasing your premium. One concept that is commonly preached is to multiply your annual income by 7,8, or even 10 times and most people ask, why and don't buy (leaving their family unprotected). Below is a way that you can accurately calculate the amount of coverage you need for income replacement.

• Determine the annual income your family needs.
• Divide that number by .07, which is the interest rate you can expect to earn on your money (please feel free to adjust the interest rate to your comfort level).
• Account for immediate and future expenses (final expenses, misc debts, college tuition, etc)
• Subtract any savings, inheritance, current insurance, or other assets from the total amount

Now, you should not only have a more precise idea about the exact amount of life insurance you need, but have a better grasp on how to determine your need.

3. What type of policy should I buy?

Once you have an idea of how much insurance you will need, it's time to think about the type of policy that best fits your needs. There are two main types of plans (term or permanent) that are used for very specific situations. If you are protecting your home and you have 24 years left on the mortgage along with two young children you are planning to send to college in 12-13 years you can customize a policy to protect against all of those needs. Now, if you are looking to help fund your children's education or transfer your estate to your family instead of the government, you will want to consider a permanent plan.

I will have more information in the future regarding the different types of plans that are available to you. It is more important to have the correct amount over getting wrapped up in all the features (also called riders) you can add on to policies. In the mean time please visit our life solutions page for an overview on each product type.

4. Consult an agent

Agents do (or should) provide an amazing service. A qualified agent can help you determine your exact need by helping you identify easily overlooked "human" elements and provide the appropriate solution and product. Insurance companies are always releasing new and innovative products and an agent can make the appropriate recommendations based on your specific needs.

5. Check the companies ratings

The policy you purchase is only as good as the company that backs it. Some agents are required to sell for certain companies while others are independent. Regardless of the agency you work with, you will want to make sure the company has a strong financial rating and will be around to pay the claim. There are four leading agencies you can check with: A.M. Best, Standard and Poors, Moody's, and Fitch.

6. Become a student

This may seem like a ridiculous statement, however, I believe it is an extremely important point in regards to anything you purchase on a continual basis. The average person will purchase life insurance seven times throughout the course of their life due life events that change the need for coverage. You will want to make sure you understand the type of coverage you have, why you have it, and how the amount was calculated. This way when an another agent approaches you about reviewing your coverage you will know how to answer their questions and determine if you should review your options -- especially if you have not heard from your agent since you last handed them a check.

Any discussion of insurance will include words such as cash value, premium, beneficiary, owner, etc. To discuss life insurance knowledgeably, it will help to understand the terms. This site offers a glossary of terms to help you better understand some of the industry lingo.