What to consider before you buy life insurance

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Buying life insurance isn’t the most exciting purchase you’ll make in your life, but it is an important one for a secure financial future. Whether you’re looking to cover big expenses like a mortgage or make sure your family isn’t stuck covering expensive bills after you die, having life insurance can give you peace of mind.

Before you jump in, here are the common considerations policyholders wish they knew before buying life insurance.

Key Takeaways

Before buying life insurance, you’ll need to decide if you want permanent life insurance or term life insurance.
Figure out how much coverage you need by calculating your debts, expenses, income and assets.
You should compare quotes from multiple insurers to make sure you’re getting the best rates for your coverage needs.

Common things people wish they knew before buying life insurance

There are many factors to consider before purchasing life insurance—like how many beneficiaries you have, the type of policy you need, what riders to add, and how much coverage you need.

Here are some common things policyholders wish they had considered before buying life insurance.

How much life insurance coverage you actually need

Many people simply guess about how much life insurance coverage they need, and often that guess is too low. A $200,000 life insurance policy may seem like plenty of coverage, but once you factor in childcare, mortgage payments, daily living expenses, college tuition, debts, and how long that sum needs to last — $200,000 may not cut it.

While everyone’s financial situation is different, it’s best to consider your debts, financial obligations and what your loved ones — or beneficiaries — would need to maintain their lifestyle after you’re gone. You can use our life insurance calculator to figure out how much coverage to get.

When to customize your policy with riders

Life insurance riders are like bonus features you can add to your policy—usually for an additional cost—but many people don’t realize how helpful they can be to their coverage.

For example, an accelerated death benefit rider allows you to tap into your death benefit early if you get seriously sick. While a waiver of premium rider allows others to pay your premiums for you if you become disabled and can’t work. It’s worth speaking with your insurance agent or financial advisor to learn which riders are out there and which ones make sense as additional protection for your needs.

Employer-provided life insurance may not be enough coverage

Many companies offer life insurance as part of a benefits package, but you may not realize that this often isn’t enough coverage. For instance, your company may only offer coverage that is double your annual salary, which often isn’t enough for an entire family. And if you leave your job, you leave that coverage behind as well.

This is why it’s smart to have an additional, individual life insurance policy you control, regardless of where your career takes you.

How much health and age impact rates

The younger and healthier you are when you buy life insurance, the cheaper it is — and oftentimes, by a significant amount. This is because insurers see young, healthy individuals as lower risk as they’re less likely to have health issues anytime soon.

Once you age and develop health conditions, you’ll see a jump in premiums and may even have trouble finding coverage. That’s why it’s important to lock in a policy as early as possible, even if you think you don’t need it yet.

Which type of life insurance is best for you?

There are two main types of life insurance policies: term and permanent life insurance. Here’s how each works and what to consider before purchasing.

Term life: The most affordable type of life insurance, term life covers you for a set period of time—usually 10, 20 or 30 years. Once the term is up the policy and coverage ends, but you may have the option to extend or switch to permanent life insurance. It does not have a cash value component, but it is cheaper than whole life, and may be a good option if you only want coverage for a set period of time, like until your child hits adulthood or until your mortgage is paid off.
Permanent life: Whole, variable and universal life insurance are all types of permanent life insurance, meaning they provide coverage for your entire lifetime as long as your premiums are paid. Unlike term life, permanent life insurance policies include a savings or investment component that builds cash value over time. With whole life insurance, for example, there’s a guaranteed return on the cash value, making it a popular choice for those looking to incorporate it into their financial and estate planning strategies. While whole life insurance is more expensive than term life, its lifelong coverage and cash value benefits can be valuable if you’re seeking long-term protection and an additional way to build wealth.

When should you buy life insurance?

Life insurance is a personal decision, and reasons to buy it will depend on your own situation.

“There are a plethora of reasons why someone might decide to buy life insurance. Someone may be starting or adding to their family, starting a new job, creating a new business, taking out student loans or buying a house. It all depends on what stage of life you’re in and the goals you want to accomplish,” says Nathaniel Segall, CFP and financial representative at Northwestern Mutual.

Many people should buy life insurance when they…

Are young and healthy and want to secure affordable premiums
Begin estate planning
Buy a house and have a mortgage
Cosign a loan
Get married or have a baby
Start a business
Take on significant debt

Buying life insurance is one of the most important financial decisions you’ll make—and taking the time to understand your options now can save you from headaches later. Whether you’re protecting your family, covering debts, or planning for the future, the right life insurance policy can offer peace of mind and security for years to come. By considering your coverage needs, exploring policy types, and locking in a plan early, you’ll be setting yourself—and your loved ones—up for financial stability no matter what life brings.

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Kara McGinley

Kara McGinley has over 6 years of experience writing, editing, and reporting on insurance and the insurance industry. She's been a licensed property and casualty expert in New York since 2021. Kara has been featured in several national publications, including USA TODAY, MSN, LifeHacker, Kiplinger, PropertyCasualty360, Policygenius, Rental Housing Journal, and WRAL.