Choosing the right life insurance policy is one of the most important decisions you have to make. Not only do you need to ensure that it meets all your requirements, but you also need to be sure that you can afford it. After all, this is a significant investment even if the monthly premiums fit your budget perfectly.
Since there are a couple of types of this policy, it is vital to choose the one that suits you best. To achieve this goal, you need to answer several questions and consider multiple things, and we will discuss some of them in the following article.
What are your options?
First things first, before we provide you with some practical tips on how to make this decision, we need to introduce you to two types of life insurance – term and permanent policies. The main difference between these two is that the former one has an expiration date. Basically, its length can be anywhere between 10 and 30 years, whatever you decide, and if you meet your end during this time, the provider will pay the benefits to the persons you name. Most people opt for this one as a safety net to ensure their spouse can pay off the mortgage or send kids to college if something happens to the policyholder. However, if you outlive this insurance, meaning if it expires, you will not get any of the premiums back.
On the other hand, there is permanent life insurance. As you can assume, this one cannot expire, and you can choose between whole and universal life policies. When it comes to the former one, the payments are fixed, while the latter allows you to change the premiums as you wish. The most common question people have is whether they have to choose between these two main types. The answer is no. You can purchase both of these, which can be a pretty good decision, especially if you are in your 20s or 30s since your needs will almost certainly change over time. If this sounds appealing, you should investigate potential insurance companies on this website and explore their plans.
Why are you getting insurance?
Now, as already said, people choose to purchase this plan for all sorts of reasons, but you need to know why you need it to make the right decision. Maybe you are a breadwinner, and your family will need some time to get back on their feet, financially speaking, if you meet your end early. Maybe you have loans and mortgage debt, and you want to ensure your spouse will be able to pay them off if something happens to you. Perhaps you even want to be cover the costs of children’s education, and ensure they have insurance benefits as a safety net. To be able to answer our next question, you first need to determine the primary reason you want to buy life insurance.
How much coverage do you need?
When choosing this policy, you need to see how much money your family will get. According to several financial advisors, it should be between ten and fifteen times your annual income. Nevertheless, it can be more complicated than this, which is why you need to do some calculations before deciding on the final sum. As already mentioned, if you have debts, you need to consider these first. Then, think about the average cost of your family’s lifestyle and the time they will need these benefits are income replacement. You probably also want to include a budget for college, weddings, and similar events in the future. Also, don’t forget about the costs of your funeral. As you know, these can be quite costly, depending on your wishes, and you want the insurance to cover everything.
How much can you afford?
Depending on the insurance you choose, monthly or annual premiums are the most important thing you have to consider. After all, there is no point in buying this policy if you cannot afford the payment. Obviously, these are determined based on the coverage you need, but there are also several other factors that can affect it, such as age, gender, health and family history, even your career and lifestyle habits and hobbies. It is advisable to research these factors first because some of them can instantly raise the rates. You can also calculate the average premium before contacting the insurance company.
When choosing between different plans, you need to find one that offers the highest coverage at the most affordable payments for you. This expense will become an essential one in your monthly budget, and it should not significantly affect your current lifestyle.
What are the provider’s terms and conditions?
Before you sign the final document, you must be completely familiar with every detail of it. These requirements can vary between different companies, which is why you need to take your time and inspect them, especially if you are considering two or more providers. Not only do you need to meet specific requirements to be able to purchase the policy at certain rates, but there are also numerous things that can affect it, as already discussed. In addition, there are some circumstances when the policy would become invalid, and you also need to learn about the lock-in period.
Revise your choice occasionally
Not many people think this is necessary once they purchase a life insurance policy. It is not set in stone, and you might be able to make some changes along the way. What’s more, this may be essential if you bought it years ago, when you were in your 20s or 30s. You will go through major life changes and won’t be the same in 5 or 10 years. Maybe now you can afford higher premiums than those 5 or 10 years ago. Perhaps you want to increase the overall death benefits or change the beneficiaries on it. The bottom line is that one plan that works for you now may not be the right one in the future, which is why it is crucial to go over it every few years.