Life insurance should be an important consideration – what will happen to your family when you die? Life insurance doesn’t have to be a morbid thought though; with the right planning and preparation you will have the peace of mind that comes with knowing that the finances of your family are protected.
There are different reasons why people decide to get life insurance:
- To protect their mortgage after buying a new house
- Getting married
- Having children
- To cover funeral costs
- Replace income for their family
- Provide an inheritance for dependents
There are several things to consider when you are looking at life insurance – from knowing what the best type of life insurance is for your circumstances, to choosing the right insurance through getting term life insurance quotes from different providers.
Choosing the right life insurance policy can be simple when you know what you need.
What Type of Insurance Do You Need?
There are many types of life insurance available, and some providers might offer just one type while others have a wider range of options. The main three types of life insurance are:
Term
Term life insurance has a set period, and for most people this covers the length of their mortgage – 15, 20, or 30 years.
Term insurance is a great middle ground for people who want a large amount of coverage without paying higher premiums, but there is no payout if the insured person survives the term covered.
Whole Life
This is the more traditional life insurance set up. The insured person is covered for the whole of their life, and the premiums are usually more expensive – but they have additional benefits.
A whole life policy often has a savings component to build cash value that you can borrow from with extra premium payments, and the final sum is paid out to the beneficiaries upon the insured person’s death.
Decreasing life
This is the cheapest option for life insurance, and the coverage is related to the amount needed to pay off the mortgage should something happen – decreasing as the mortgage amount decreases.
What Factors Affect the Price of Life Insurance?
Over half of Americans have life insurance, through their workplace or as a personal choice. Life insurance isn’t a ‘one-size-fits-all’ offering – there are many factors that will affect the coverage you can get and the monthly premium you will pay.
- Age: Younger people tend to get better coverage for cheaper.
- Health: Some pre-existing medical conditions might mean you can’t get coverage, or there are specific exclusions
- Lifestyle: Partaking in risky hobbies like skiing or rock climbing could see premiums increase
- Profession: Having a dangerous profession like being a firefighter might make premiums increase.
- Where you live: Unfortunately, people living in areas considered to be more prone to crime are likely to have higher premiums
- Smoking status: Smokers, and even ex-smokers, are more prone to health issues and can have higher premiums
- Family medical history: Some genetic and hereditary conditions can prevent life insurance policies from being valid.
- Monthly cost: A cheaper monthly cost might mean less coverage or a smaller death benefit
- Amount payable: The more you want to be insured for, the higher the premium is likely to be.
What is the Best Type of Insurance for Me?
This is a difficult question to answer because it depends on what your personal needs are. To help make the right decision, consider the below questions:
What Do You Want to be Covered?
For some people, life insurance is simply a way to ensure that the mortgage on the house is paid when they die. This means that they only want to get coverage up to the amount of their mortgage, making a decreasing life policy a good option.
Others might want to make sure that their income is replaced, covering bills and other expenses for the family that remain as well as paying off the mortgage.
Higher coverage can mean that not only is your income going to be covered and the mortgage is paid off, but you might be able to set up an inheritance for your children to cover things like college fees after you have gone.
What is Your Budget?
Even if you want a high death benefit or to unlock cash value in your life insurance, you need to be able to afford the monthly premiums. Your budget and finances will have to cover the premiums if you want to buy an affordable $25,000 life insurance policy, so if there is not a lot of spare income available for this you might have to trim down the coverage amount.
You can make the most of your budget by comparing insurance providers and getting a range of quotes before deciding.
The Importance of Comparison
Not all insurance companies are created equal, and neither are their policies – much like when you are searching for a policy for your car. Getting a life insurance quote can mean filling in a lot of information in a form and answering a lot of personal questions, but don’t let this put you off trying to get as many quotes as you can.
Price comparison should not just be about the amount you are paying in a monthly premium; you also want to check for the amount insured, whether there are any extra benefits like funeral costs or end-of-life options, and whether you can cash in early for a terminal diagnosis.
Take some time to find the right life insurance for you so that you can have the peace of mind that your family is protected financially when you are no longer around.
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