No matter what age you are when you decide to purchase a life insurance policy, you do need to take a good look at the many different types of policies available before you make your final decision. Everyone has different needs and levels of income there are policies tailored towards those needs and incomes. It is important to do your research to educate yourself about the various policies so that you do get the right one for you.
Some of the things you should consider when choosing life insurance are:
– how much life insurance you need
– the type of policy you should buy
– the cost of the life insurance
– the ease of making changes and renewal
How much life insurance do you need?
A good rule of thumb to follow in determining how much life insurance you need is to multiply your annual income by three. Experts recommend that you should have at least this much in a policy so that your family will have the funds needed for your funeral expenses, to pay off medical expenses and other debts and to live comfortably while they are grieving.
The amount of money you need to have in a policy really depends on your financial circumstances. Most people want to make sure they do leave enough to cover their burial so that they do not place a burden on their families. Parents with young children want to make sure there is enough money in the policy to pay for the children’s education and to make sure the mortgage on the family home will be repaid in full.
You do have to sit down and take a good look at your financial situation in order to determine how much is enough for you when choosing a life insurance policy.
What are the various types of life insurance policies?
The type of life insurance policy you choose depends on your age. Experts recommend that if you are less than 40 years old and you don’t have a critical illness, then you are better off choosing a term life insurance policy over a whole or permanent policy. It is essential that you understand the difference between the two.
Term life insurance is for a specific period of time – usually 10 to 20 years. The amount of the payout remains the same as do the monthly premiums payments. If you should die during this term, your beneficiary will receive the amount of the policy. However, at the end of the term, the insurance policy is no longer valid and if you do not renew for an additional term or choose another type of life insurance, you won’t have any at all.
Whole life insurance is for your full life no matter how long you live. Most of these policies have a cash value associated with them so that you can take some money out of the policy while you are still alive. In such a policy, you could choose to make monthly or annual premium payments for your entire life or pay off the cost of the insurance policy in a shorter period of time. In any case you will be fully covered until the day you die.
You also have another option for life insurance with a universal life insurance policy. In this type of policy a portion of the premiums you pay go into another fund that you can use to help offset the cost of the premiums later in life. You can also change the amount of the death benefit in such a policy but the administrative costs of this option are quite high.
How much will a life insurance policy cost?
The bottom line in choosing a life insurance policy is the monthly cost. The amount you pay depends on the type of life insurance policy, term or whole life, the amount of the death benefit, the status of your health and whether or not you smoke, drink alcohol or take drugs. The younger you are the cheaper your policy will be. Women pay lower premiums than men because they have a longer life expectancy. However, if you smoke, drink or take illegal drugs, you will be penalized by having to pay higher costs. Other factors that come into play in determining the cost of the policy include the rates charged by the insurance provider.
How easy will it be to make changes to the policy or to renew a term policy?
These are questions you need to ask the insurance agent when you are discussing the various types of life insurance policies. If you take out a life insurance policy when you are young, you will undoubtedly have many changes whether you have a term or whole life policy. This includes getting married, having a family or getting a divorce. Each of these changes in life means you will have to make changes to the amount of the death benefit and this will impact the cost of the premiums.
Most life insurance policies do provide for such changes, but it is important that you do ask about the ease or difficulty before you make the final purchase.
Term policies are no longer valid once the term of the policy expires. Most insurance providers notify you that you must renew within a specific period of time. You may need to have a checkup by a doctor in order to renew or the insurance provider may not require this. Also, because you are older, the premium costs will also rise significantly.
One of the main things about purchasing life insurance policies is that you do have 30 days in which you can cancel and receive a refund of any premiums you have paid. In some cases where a medical report is required you have three months to cancel your policy and receive a full refund.