Most people acknowledge the need for some type of life insurance. But when it comes to shopping for life insurance, they don’t know where to start. There are numerous policy options and several factors to take into consideration. If you feel that it’s time to purchase a policy, here are five things to know when shopping for life insurance.
There are two primary types of policies.
You have the option of a whole life policy or a term life policy. Term policies are commonly chosen due to their affordable monthly payments. However, term policies expire after a set amount of time. You can renew a term policy, but usually at a higher rate. Although whole life policies have higher premiums, they do not expire. Plus, some policies have a guarantee cash value, which you can borrow against once the policy matures.
Think long-term.
If you decide to skip a permanent policy and purchase a term life insurance policy, choose a long-term policy. For example, you may choose a policy with a term of 10, 20 or 30 years. Thus, your insurance rate is guaranteed to remain the same for this length of time. Before your term ends, you might consider a whole life policy to lock in a permanent policy and a permanent rate.
Buy insurance when you’re young.
The premium you pay on a life insurance policy depends on many factors, such as your age and your health. Because younger adults have fewer health issues, this is the best time to get a whole or a term life policy at an affordable rate. As you become older and develop health problems, premiums increase. Don’t wait until you’re ill to acquire life insurance. Some insurance companies may deny coverage after a major diagnosis, or charge a much higher premium.
Purchase enough coverage to pay off your debt.
Some people mistakenly only acquire a policy to cover their funeral and burial. While these are major expenses, you must consider other factors as well. Life insurance is designed to ease your family’s financial worries after your untimely death. Funds should not only cover your funeral, but also pay off your personal debts. This includes your auto loan, credit cards and other loan payments. And if you have a family, a life insurance policy should replace your income for years to come. Insurance needs vary from person to person. As a rule, choose a policy that’s 5 to 10 times your annual income.
Not all policies are the same.
Shop around and speak with different insurance agents. There isn’t one set premium for an age group. To keep your costs low, request no-obligation quotes from multiple agents. You can shop online or contact a local agency. Whereas one life insurance company may charge $25 a month for a term life policy, another company may charge the same person $17 a month. Take your time, ask questions and purchase a policy that meets your needs.