When considering purchasing a life insurance policy, you need to be aware of the many factors that can affect how much coverage you’ll be eligible for and how much it will cost. Being armed with all the information ahead of time can help you make an informed decision about your own specific insurance needs. This article will discuss ten of the most important factors to consider when buying a policy, in order to help you make smart choices about your coverage and your budget. Keep these points in mind as you review different plans and speak with agents, so that you end up choosing something that works best for your specific needs and goals.
Should you purchase a Term or Whole Life Policy?
What Is The Best Choice For Your Coverage? If you’re like most people, you need life insurance so that your loved ones can maintain their current lifestyle if something should happen to you. However, there are two main types of life insurance, with three different categories,
Term Life, Return of Premium and Whole Life. The first is Term Life Insurance. This is insurance that will cover you for a certain amount of time, depending on the amount requested in the contract. It could be anywhere from one year up to 30 years. However, after the term is over, the cost of the insurance will increase dramatically and it would be advised to cancel it and get a new policy at a more affordable rate. This policy is for people who want to cover a mortgage, replace income while their children are still in the home, etc. The second category is return of premium, which differs from regular term in that after the term period, if there hasn't been a claim filed or loans taken out on the policy, the entire amount of the premiums are refunded, less claims or loans. This policy will be more expensive than a regular term. The final type will be Whole Life Insurance. It is the most expensive, it will cover the insured his or her entire life and it will build cash value which can be borrowed against once it has been raised in the policy. A certain percentage of the policy will go towards the building of that cash value. However, once the person gets older, the cost of the insurance will increase and it can be taken out of the cash value of the policy to cover that cost. It might be a good course of action to take the cash value out of the policy when the premiums increase and get a new Final Expense policy with level premiums.
The first step in determining how much life insurance you should purchase is assessing how much you need. Your goals, current income and debts are all factors that affect how much coverage you’ll need. For example, if your family relies on two incomes and doesn’t have a safety net of savings, it may be a good idea to carry more coverage than someone who’s single with ample savings. You can also use a Life Insurance Calculator.
What Type of Benefit Should You Choose?
There are three basic types of life insurance policies: Term, and Whole or Universal Life. While there is no one right answer when it comes to selecting a particular type of policy, you should consider how long you will need the coverage for and how much financial support do you expect your family to need in case of your death. Term insurance is good for short-term coverage needs for up to 30 years. Whole life and universal policies last for your entire lifetime; these are generally considered long-term policies. However, they are more expensive, but they also have a Cash Value component that you can borrow from in an emergency.
What Is Your Lifestyle?
One of the most common questions a life insurance agents ask customers is what their lifestyle is. But what exactly does that mean? In order to provide an accurate quote, you need a definition of lifestyle—and it’s not as simple as income versus expenses. Your job status, marital status, and family situation are all important factors. If you don’t want to overspend on your life insurance policy, consider some of these points before shopping around for coverage.
Are you in good health?
You’re eligible for a policy if you don’t have any serious medical conditions. If you have a pre-existing condition, it may not be covered under your life insurance policy. The specific details depend on your carrier and policy. There are policies that cover people with health issues, but they are generally more expensive and harder to qualify for.
Where Will the Money From the Go?
The first question you should ask when buying life insurance should be "How much do I need"? You don’t have to have a figure in mind, but you should know how much money your loved ones will need after your death. Aware Insurance can help with that, as can a financial advisor. If you already have a good handle on what your loved ones will require if you die, then you can work backward from there.
Can you afford the premium payments?
The typical life insurance policy comes with a monthly, quarterly, simi annual or annual premium payment, which is just a fraction of what you would receive if you filed a claim. If you have difficulty affording your premium payments, you may want to look into term life insurance instead of Whole life or Universal life insurance. Term policies typically come with low premiums in exchange for a shorter coverage period (i.e., 10 or 20 years). In most cases, term life is much cheaper than whole-life policies.
How much do you spend on insurance?
Do you know how much you spend on insurance every year? If not, it’s probably time to do some investigating. Add up your premiums for car, home, life and health insurance. Then figure out what percentage of your annual income is being spent on those four things alone. That should give you a pretty good idea about whether you can afford any new insurance policies in addition to all your existing ones.
Life Insurance is for your family, but it also can have advantages for you.
A big reason you may want to consider buying a policy from an independent agent is that there are no sales commissions or fees. You should also know that term life insurance costs less than permanent insurance and generally isn’t affected by your health. Permanent policies cover your death and any additional living expenses if you become disabled. Some policies will pay a percentage of the face value if you become terminally ill.
What are your long-term plans?
It is important that you get to know yourself and your family’s needs when it comes to life insurance. You need to decide whether you want term or permanent insurance, and what amount of coverage will work best for your situation. There are also several factors that you should consider before purchasing a policy, such as how much does it cost?
With rising cost of living expenses, it can make for an increasingly uncertain financial future. It’s not surprising that consumers are looking for ways to protect their families in case something happens. With so many insurance options on the market, buying life insurance can be confusing. To make sure you get just what you need when purchasing a life insurance policy, keep these 10 factors in mind. Take your time and make sure you read your policy carefully. Again, we're always here to help.
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Licensed Life/Medicare Agent
Ca. Insurance License Number: 0G97478
Aware Insurance Services
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