There are many different options available when it comes to life insurance, leaving you with a range of choices that can often seem bewildering. At first glance, they can be difficult to understand – so you’re not alone if you’re not sure where to get started.
The best place to begin is by asking yourself an easy question – do you really need life insurance, and if you do, why? The answer to this question can help you decide which life insurance to purchase, so make sure that you go into as much detail as possible. Let’s explore the different types of life insurance policy available – by now you should hopefully find it easier to match one up with your needs.
#1. The Purpose of Life Insurance:
First, let’s look at the purpose of life insurance and all the various reasons as to why it may be a good option for you. Many people decide to get life insurance after becoming a parent – suddenly finding yourself responsible for a human life can be the push you need to make sure that those nearest to you are financially comfortable in the event of your death. Or, perhaps you have started a business with a partner and want to make sure that they can afford to continue running the company if you die. The need for life insurance will vary depending on your personal situation, but the idea is to make sure that somebody who relies on you financially won’t struggle if you were to pass away.
#2. How Much Coverage?
It can be difficult to work out exactly how much coverage you will need to protect your family’s financial future, especially if you work in a high-risk profession like law enforcement. This can depend on a variety of different factors including your income, debts, lifestyle and how many dependents you have. A general guideline would be to obtain a policy that pays out five to ten times worth your annual salary in the event of your death – avoid going too high as not only would this make your premiums more expensive, but it can also cause additional issues for your family should they need to make a claim.
#3. Types of Policies:
Once you’ve decided how much life insurance you need and why you need it, it’s time to consider the different types of policies available. Whole life insurance is the most expensive policy – purely because it’s guaranteed to pay out someday. Your premiums will remain the same until you have paid off the policy. On the other hand, term life insurance is usually cheaper as it will only cover you for a certain period of time, lowering the risk of paying out for the insurer. You can choose term insurance if you only need to be insured until you have paid off your mortgage, become debt-free, retired, or when your kids move out of the family home, for example. Another option to consider is decreasing life insurance. This policy offers cover that gradually decreases over time as you need less – for example, you’re likely to need less cover as you repay your mortgage and debts over time.
#4. How to Find the Best Policy for You:
Finally, now that you know what you are looking for, it’s time to find the best policy for your needs. Shop around – you may be surprised at what you find, compared to only going with insurers that you’re familiar with. It’s worth using comparison sites as a handy way to get all your options in one place. If you are considered high risk due to your career or a health condition, it can be worth hiring a professional insurance agent to work on your behalf.
Which type of life insurance is best for you? We’d love to hear from you in the comments.