Life insurance is a must for everyone. However, it can be challenging to know where and how to start when needing this type of coverage. With so many different policies available in today’s market, finding an affordable plan that meets your family’s needs can be confusing. You need to know and understand some basic things when purchasing life insurance. First of all, life insurance comes in many forms: term policies that last for a specific period of time and whole life policies, which offer protection for the duration of your lifetime.
Below are things you should consider when choosing life insurance.
Consider Different Quotes
When considering life insurance, it’s essential to look at what type of coverage you need and get a fast quote for life insurance that matches your needs. Shopping around before you need it gives you time to compare prices and see which options best accommodate your situation. It is a good idea to get quotes from several different companies before making a decision on your coverage and rates. Some insurance companies require that you contact them in order to receive a quote, while others may give you an instant quote online.
In most cases, you can request a quote from several different companies at once. This makes it simple to compare the prices and coverage before choosing a specific company. Not only will this help you save time in making your final decision, but you may also find that there is a better option for your needs than what you had initially thought.
Policy Types
If you are looking for life insurance, several types have different functions to choose from. You need to consider four main policy types: term life insurance, whole life insurance, universal life insurance, and variable universal life insurance. Knowing the difference in these types of policies is essential when making a decision that will affect your family or business.
Term Life Insurance
Term Life Insurance is the most basic and typically provides coverage for a set period, such as 10, 20, or 30 years. This is beneficial when you are in good health but want to make sure that your family has financial security in the event of an untimely passing. Typically, the premiums you pay for a term policy will increase as you get older for many reasons, namely, a decrease in your total life expectancy.
Whole Life Insurance
This type of policy provides lifetime coverage and can be used to cover final expenses or provide assets to your heirs. It typically costs more than a term policy and does not decrease premiums as you get older. Whole life policies usually do not have refunds at cancellation, though some companies may offer them if the policy has been held for a certain number of years.
Universal Life Insurance
Universal life insurance can be a good choice if you would like flexibility in terms of premium payments but is not as complex as variable life insurance. These policies provide lifetime coverage with variable premiums that fluctuate depending on your age and the amount of coverage you purchase. Most universal life policies also allow you to contribute money and cash in loans and withdrawals without affecting your policy. However, this is subject to the terms and conditions of the particular company.
Variable Universal Life Insurance
This type of policy is considered a combination of terms and universal life. This means that the premiums will generally start low compared to a whole life insurance plan, but you can also contribute money into your account over time. The premiums will increase if you get older, have more coverage, or fluctuate depending on how abruptly your investments change. For this reason, it is a good choice if you want the flexibility of universal life with the lower premiums of term insurance.
Premium Payment Method
Here are two main ways of paying life insurance premiums. Automatic deduction from a checking account and monthly payments. The automatic deduction method is the easiest and most logical choice for people who have absolutely no time to pay their monthly premium or do not want to set up a budget. However, if you decide on this option and incur late fees due to insufficient funds in your account, you will pay dearly. For people who can not afford a single missed payment and like to keep their insurance premiums on the same level every month, it is better to choose Monthly payments.
Once you select either of these options, everything will be handled by the life insurance company, and you won’t have to worry about it anymore. Some life insurance companies require a minimum premium payment once you take out a policy (e.g. $50 or $100). If this is the case with your chosen company, make sure that you can afford such an amount. Otherwise, you might lose your coverage.
Though not a lot of companies advertise it, you can also pay your premiums in installments over three to five years without any additional fees or interest compounding. This is a very good option for people who have just started working and do not have the money on their hands yet but need insurance immediately (e.g. young families or recent graduates with huge loans to repay).
People who are unable/unwilling to pay their life insurance premium in full will bear additional costs. The only thing you can do is not let your policy lapse, i.e. provide evidence that you are still able and willing to pay your premiums on time.
Cost Of Waiting To Buy Coverage
The cost of waiting to buy coverage could be very high if you cannot get coverage when you finally decide it is time. The value of life insurance does not change, but your ability to purchase it may change. For instance, if you are in good health when you delay the purchase of life insurance until age 45 but then have a heart attack at age 55, you may no longer be insurable. Suppose your health hasn’t changed, but the cost of coverage has increased due to the insurance company’s assessment of your age or medical condition. In that case, that cost increase could also make coverage unaffordable to you.
On the other hand, if you delay buying life insurance until age 50 because your monthly budget is tight, but then your financial condition changes so that you can afford to buy $500,000 of coverage at age 55, the cost of waiting could be worth it for you. It may cost around $650 per month for the same $500,000 coverage that you could have bought at age 50 for about $300 per month. That is a savings of over $600 per month on premiums, which can buy a lot.
Choosing the correct type of life insurance can be difficult, but it gets much easier once you know what options are available to you. By checking into all of your choices and getting quotes on life insurance coverage, you can ensure that your family will be adequately protected in case of an unfortunate event.
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