How to Choose the Best Life Insurance Policy
Life insurance is what it sounds like. It is an insurance policy that pays out if the person insured passes away within the time period it covers. No one wants to think about life insurance, let alone get it, but it can be a very smart responsible decision.
Here is the basis of what you need to know to understand life insurance and how to choose the best policy.
Most people can benefit from some amount or form of life insurance. If you have a spouse, kids, or anyone who depends on you financially in the present and future. If you have kids you want to send to college or a mortgage that needs to be paid off.
These are all reasons you should consider getting life insurance.
Life insurance ensures that if the person insured passes away, everyone depending on the income they provide will be taken care of, kids sent to college, and mortgage will be paid.
Each situation is different so there is no rule of thumb when it comes to the amount of life insurance that one may potentially need. To understand how much is needed, it is best to make a list of all outstanding debt, major life expenses to come, like college, and lost income each year. This will provide a starting point for calculating the amount of coverage that is needed. It is best to consult a financial planner to really pinpoint the amount needed.
Getting life insurance isn’t as easy as making a Facebook account, there is a lengthy application and health physical to assess the health of the person looking to get covered. Age, health, and genetic issues that run in the family, dangerous lifestyle activities, and more are all factors that affect the cost of a life insurance policy.
In other words, if you go skydiving for fun on the weekends, expect to pay more than someone in similar health who knits.
Fortunately, there are different types of life insurance and most insurance plans allow you to structure them to fit your specific needs. Here are the main types of life insurance to be aware of.
Term life insurance is the least expensive kind of life insurance and provides coverage of a specific amount for a specific period of time. If the insured person were to pass away during that period, the policy will payout to the beneficiaries.
There are different types of permanent cash value life insurance but it is beyond the scope of this article to get that deep into the weeds of life insurance. Cash-value life insurance is essentially a policy that is started and keeps going for the remainder of the insured person’s life.
Permanent policies have a base coverage amount and then a cash account attached to them which can grow at a fixed rate or with some relation to the stock market. These policies stay intact and will pay out if a person dies tomorrow or lives to be over 100.
Now that you have a basic understanding of life insurance, this process to follow to help you choose the best life insurance policy.
And remember, life insurance is cheap and easy to get when you don’t need it and expensive and sometimes even impossible to get when you do need it.