When you are ready to buy insurance, consider the following
Decide first how much insurance you need and the length of time
the protection should last. Then decide what type or
combination of types of insurance plans best serve your needs.
Look for a policy with a premium you can afford. Buying a policy
that you let lapse within the first few years of your purchase is
expensive. If you do not expect to need insurance for more than
a few years, term insurance may be the most economical.
Shop around. Comparing the costs of similar policies from
different companies is extremely important. Beware of promises
of large financial awards or other sales gimmicks used to obtain
your business. You should shop for life insurance the way you
shop for anything else that costs a considerable amount of
money and is important to your family’s welfare. This will take
time, but if you were buying a new car you would expect to
spend several weekends deciding what kind of car you wanted
and where you could get the most for your money. As a smart
shopper, of course, you want the policy that gives you the best
Examine the benefits built into your policy. If your policy has
conversion or renewal options, disability waivers or accidental
death benefits, be sure you know how these benefits work and
how much they cost. Remember that a life insurance policy is a
legal contract and the only conditions under which claims can
be paid are those which are written into the contract.
Since life insurance death benefits will not be paid to you, the
settlement options should be explained to the beneficiary. Make
sure your beneficiary knows the proper procedure for filing a
claim and where the policy is kept
Select a sound company and a reliable agent. Although buying
through an agent is optional, the advantages are that an agent
can make suggestions about how much insurance you need,
what policy is best for you, and what the legal language of
policy options means for you. On the other hand, if you know
exactly what you want, you may save money by dealing with a
Check with the Bureau of Insurance to see if the company and
the agent are licensed to do business in Virginia. (see chapter 5)
Examine the policy carefully. Be sure it provides you with benefits
you want, need, and can afford.
Carefully review the copy of your application contained in your
policy. You should report any errors or omissions to your
company or agent.
Do not pay cash for any policy. Make your payments by check,
money order, or bank draft payable to the insurance company,
not the agent or anyone else. Be sure to get the name, address,
and telephone number of the agent and company. Obtain a
local or toll-free number (if the company has one) so you can
contact the company.
Use the “free-look” provision. Individual life insurance policies
issued in Virginia must contain a provision that allows you to return
the policy to the company in at least the first 10 days after you
receive your policy. If you decide you do not want the policy
after you purchase it, you can cancel the policy and get your
money back if you notify the company within a certain number
of days after the policy is delivered. If the possibility exists for the
policy to be cancelled, keep the envelope the policy was mailed
in or insist your agent give you a signed receipt when he or she
hands you the policy. If you decide to return the policy, send it
to the insurance company along with a brief letter asking for a
refund. Send both the policy and letter by certified mail and get
a mailing receipt. Keep a copy of all correspondence. Contact
the Bureau of Insurance if you have a problem getting a refund.
Decide how you want to pay premiums. If you pay monthly
quarterly, or semi-annually, rather than annually, there will be
additional charges, in part because of the company’s added
time to administer the paperwork, unless you use an automatic
payment technique. Many companies also make arrangements
for having the premiums automatically deducted from your
checking account or – if your employer agrees – from your salary
so you do not have to worry about forgetting a payment.
Reassess your life insurance needs frequently. Remember that
your needs will change as the number of dependents and
income change. Check periodically to see whether the
beneficiary named in your policy is still your choice.
Contact your original agent or company before making any
decisions on whether to replace an existing policy with a new
policy. Surrendering your current policy in order to purchase a
new one could be very costly.
Check the rating of the company. Ask the reference section of
your local public library for claims paying ability and financial
rating publications that summarize an
insurance company’s financial strength.
These can be helpful as an additional
source of information.
MOST IMPORTANTLY, DO NOT BE AFRAID TO ASK QUESTIONS. MAKE SURE YOU
UNDERSTAND EXACTLY WHAT THE POLICY CAN AND CANNOT DO FOR YOU.