Death is inevitable, and nobody can ever tell when their life will end. That’s why everyone should have life insurance, most especially the breadwinners of their respective families. Life insurance refers to a contract between a policyholder and an insurer wherein payment is guaranteed in the form of a death benefit to the policyholder’s beneficiaries.
In this post, you’ll learn how to choose the right life insurance for your own and your family’s financial protection.
Know The Best Type Of Life Insurance For You
There are generally two types of life insurance, and choosing the best one is an important decision for you to make. You’ll find a wide array of life insurance products based on your needs, including burial insurance for seniors. Check out these helpful tips to know the best insurance option for you:
Term Life Insurance
A term life insurance, as its name implies, refers to a type of life insurance, in which the coverage applies only for a specific period of time. It enables you, the policyholder, to match the length of the insurance term policy to your needs.
A good example of term life insurance is a 20-year term life insurance, which is applicable for those who have young children so that their college education will be funded. Another example is a term insurance policy that’s meant to repay a debt in a specific period of time.
You might also want to choose term life insurance given the following situations:
- You have a tight budget but need to have a huge amount of life insurance for your beneficiaries’ financial protection if ever you die within the term of the policy. You won’t build equity, unlike permanent life insurance, in cash savings form.
- You may consider “convertible” term policies if you think your financial needs will change as these would allow you to convert your term life insurance to permanent life insurance. This will require you to pay higher premiums.
Permanent Life Insurance
Permanent life insurance provides coverage for a lifetime. It means that the insurance company will pay a death benefit to your beneficiaries, whether you die tomorrow or you live more than a hundred years.
Here are the good-to-know facts about permanent life insurance:
- You can use the death benefit as collateral for a loan, such that the insurance company will collect what is due to the lending company and give the rest to your beneficiaries.
- You can choose to accumulate a savings element that you can borrow for different purposes, and which will grow on a tax-deferred basis.
- The savings element of permanent life insurance can be used to pay your premiums, keeping the life insurance active even if you can’t pay it.
- Premiums are higher for permanent life insurance than a term insurance policy. The amount of premium remains the same with a permanent life insurance policy, whereas the number of premiums you pay for renewing a term life insurance increases substantially.
Take Important Things Into Consideration
It can be overwhelming and confusing to choose the right type of life insurance plan for you, that’s why you should take important factors into consideration. Life insurance policies can, at times, contain intricate details, but their basic purpose is all the same.
Here are the important factors you have to consider when choosing the best life insurance plan for you:
- Age: The younger you are to avail of life insurance, the more options will be presented to you. For basic life insurance, the eligibility to purchase one is at 60 years old.
- Gender: Women tend to have less expensive life insurance policies than men because females tend to live longer. Your age and gender are the two basic factors that life insurance companies use to determine your premium.
- Health Status: A medical exam is usually required when getting a life insurance policy. You’ll need to answer medical questions to determine if you have any pre-existing conditions that may affect your premium. The healthier you are, the less amount you’ll pay for your premiums. Smoking and other forms of vices are negative factors when pricing your life insurance.
- Duration Of Needs: If you think you only need life insurance for a certain period as a backup to cover a mortgage when you die, then a term life insurance is a good option. You can choose a 10-, 20-, or a three-year term. However, if you want financial protection for you and your family for more than 30 years, permanent life insurance is highly recommended.
- Budget: Term life insurance suits a tight budget and doesn’t usually offer a cash value. On the other hand, permanent life insurance is more expensive than term life insurance, and cash value is built over time.
- Your Market Knowledge: You can use your life insurance policy to generate cash value that you can use for other purposes. Knowing the exclusions of life insurance is very important to ensure that your beneficiaries will receive the right death benefit that you expect, as well as for you not to worry about finances when you’re gone.
Talk To A Life Insurance Agent
Once you have already made yourself aware of the different life insurance options, it’s high time to talk to life insurance agents and choose the best company that can provide the best terms for you.
Life insurance plans are usually given different names for marketing purposes. But, you won’t be confused as long as you’ve done your research. You have to specifically know the terms of the life insurance plan presented to ensure that it aligns with your needs. Says Martin Stocker of Burial Insurance Pro ” many people get confused by marketing terms given to various life insurance products. Examples include ‘Mortgage Protection Insurance’, or ‘Final Expense Insurance’. These are actually life insurance policies taken out for a specific financial reason. At the end of the day, anyone can use a life insurance for their specific financial needs. Don’t let generic marketing terms confuse you”.
Here are some tips when choosing a life insurance company:
- Choose a trusted insurance company with years of experience providing excellent insurance products and quality services.
- Check reviews on social media and review sites to know how the insurance company handles claims and their clients.
- Get referrals or recommendations from your relatives and friends who have life insurance policies to get an insight into the best plan for you.
Knowing the different types of life insurance policies and the important considerations to make will help you choose the best plan for your needs. Whether you choose a term life insurance or a permanent life insurance, anything you pick is better than nothing. Also, it’s a big help talking to a life insurance agent, so all your questions will be answered, and your concerns will be addressed promptly.
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