You’ve come to a point in your life where you have a bevy of responsibilities. Whether you’ve just bought your first home, gotten married, or started a growing family, you have people you love who rely on you. You need to make sure they’re taken care of even if the worst happens and you can no longer support them. It’s time to think about life insurance.
Buying your first life insurance policy shouldn’t be difficult, but there are things you’ll need to know to get the best policy for your situation. Here are five steps to help you figure out what kind of policy you need and how much coverage you should purchase.
How much insurance should you buy? It depends on your unique situation. Think about how many dependents you have now and how many you might have in the future. Consider whether your spouse will be working and how much they will be able to contribute to the family budget. Review your debts and financial obligations. Make sure your family will have enough to cover mortgage payments, for instance, and any other loans you’ve taken out.
Life insurance is a long-term purchase, so you need to project your needs and goals far out into the future. How much will it cost to make sure your children get the education that will equip them for a productive life? Think about retirement and a possible second-act career for you and your spouse.
As a good rule of thumb, multiply your annual salary by the number of years you’d like your family to be covered, then add in any long-term debt like your mortgage payment and other obligations including your children’s college education.
Your financial professional can go over all these variables with you and recommend life insurance coverage that meets your protection needs.
You have a lot of expenses to cover just to keep your household going. You don’t want insurance premiums to be too much of a financial burden.
Talk to your financial professional about how much you can afford to pay for insurance on a monthly or annual basis. If money is tight, you may want to consider a less expensive term life policy that can provide a benefit if you pass away but doesn’t build up any savings. Whole life insurance, which enables you to accumulate cash value over time, is more expensive but may be worth it if you can afford it.
Consider adjusting other parts of your budget to free up funds to pay for insurance, such as spending less on clothing or entertainment. Life insurance is important. It can be worth making a few sacrifices for the peace of mind it can help bring.
Life insurance is less expensive if you live a healthy lifestyle. If you smoke, are overweight, or have a chronic condition like diabetes or high blood pressure, you’ll pay more in premiums and may have difficulty obtaining coverage. Think about whether you can make lifestyle changes, such as quitting smoking, exercising more, or cutting down on alcohol consumption, to qualify for lower-cost coverage.
It's important, however, to be honest about your health when you apply for life insurance. If you don’t disclose health issues, your insurer may refuse to pay a claim or cancel coverage.
Life insurance can be part of your overall financial portfolio. Ask your financial professional to explain how your policy can complement your overall savings strategy such as your retirement savings plan or a personal investment portfolio.
Some types of life insurance, like whole life policies, have a general account component. Part of your premiums go into cash value that grows tax deferred every year. You can borrow against it if you need to.1
Because this value grows tax-deferred, it can be an effective way to transfer wealth to the next generation. Death benefits go to beneficiaries directly, without going through the probate process, so they can be a ready source of cash while the estate is settling.
Life insurance can be complex. Different policy types may have widely varying benefits, costs, and tax implications. A financial professional with experience in life insurance can help you choose the right policy, or multiple policies, to achieve your objectives.
A financial professional can guide you through often complicated policy details and terms, making sure you understand the basics of how your insurance works and what it offers you. They can help you select policies that fit with your unique financial situation, providing the coverage you need at a price you can afford. Your financial professional will also periodically review your life insurance coverage with you to make sure it still meets your needs. You may need more as your family grows or less as you pay down long-term obligations like a mortgage.
Buying your first life insurance policy may be a little intimidating, but a financial professional can help. Why not set up a meeting to discuss your needs today?
1 You can access the cash value in your policy, generally tax-free, via partial surrenders and policy loans. Policy loans and surrenders reduce the policy’s available cash surrender value and death benefit. Loans also accrue interest.
This article is provided for general informational purposes only. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.
SMRU #6175792 exp. 1/8/2026