Choosing the Right Life Insurance Plan

January 11, 2021

If you are an adult, you probably need life insurance. If you don’t know the first thing about it, buying the right life insurance policy can seem overwhelming. Not only do you have many program choices, but you have to choose the right amount and terms too.

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Before you get overwhelmed, learn the basics that you should look for when buying your first policy.

Figure Out Why You Need a Life Insurance Policy

First, consider why you need the life insurance policy in the first place. Do you have a family? Are you the breadwinner? Do you own a home? Do you want to pay for your kids to go to college? These are factors you must consider as they will help you determine the type of policy you need.

If you are young and just looking for a policy to cover your family in the event of your premature death, a term policy will likely suffice. This is often the most affordable life insurance as it has no cash value – it simply protects your family should you die unexpectedly. You can take out a policy that covers your income a few times over or at least that covers the value of your mortgage.

If you are older or you want to combine your life insurance with an investment vehicle, you may want something more complex like a whole or universal life policy. These policies offer the benefits of a term policy but with a cash value that you may be able to use during your retirement years if necessary.

Once you know the type of policy you need and why you need it, you can start concerning yourself with the factors below.

Is it Affordable?

Take a long hard look at the premiums on your life insurance policy. Can you comfortably afford them? What would happen if your income suddenly stopped? Would you still be able to work the payment into your monthly bills? Is it a payment you’d have a hard time making if you hit hard times?

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The last thing you want is to let your life insurance policy lapse. When you pick up the pieces and apply for insurance again, chances are the premiums are going to be much higher. The older you get the more expensive premiums become. Insurers also become more restrictive as your health changes, making it harder to even get a policy. If you secure a policy when you are young, make sure it’s a premium that is attainable and not one you have to sacrifice to make so that you have a better chance of being able to pay it for many years to come.

What is the Term?

Life insurance doesn’t last forever. You can buy policies for as little as 10 years or as long as 30 years and everywhere in between. Think about what protection you want. Do you want the policy for as long as you owe a mortgage? Do you want a policy in effect until you are retired? Only you know what term is best for you based on your income, lifestyle, and savings. If you only need a policy until your mortgage is paid off because you have adequate savings to get you through retirement, then choose the term that coincides with your mortgage. The shorter the term you choose, the lower your premiums will be.

How can you Access Your Money?

If you take anything but a term life insurance policy, you’ll have access to your funds. You’ll need to know the circumstances you can withdraw the funds, though. For example, some policies require you to take a loan, in other words, pay interest on the money you withdraw. Others allow you to directly withdraw the funds but limit the amount you can take at one time.

Before you shop for a life insurance policy, you’ll want to have a thorough understanding of why you need the insurance in the first place. This way when you shop for the right policy, you’ll know what to look for and how to handle it. If it’s just temporary insurance to get you through a specific point in your life, term insurance may be just fine. If, however, you want an investment vehicle along with the protection life insurance offers, you may want a more complex policy that will require a little more digging and understanding of how the policy works.

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