With so many insurance options available, choosing the right one for you can be a bewildering process. Understanding the different choices can be difficult at first glance, and if you’re taking out life insurance for the first time, it can be hard to know exactly where to start. The best way to get started is by asking yourself an easy question – do you actually need life insurance? Come up with a detailed answer to that question, as this can help you not only decide whether or not this is a necessary purchase, but also what type of life insurance is going to be the best choice for you. If you’ve decided that you need life insurance, then read on for more information.
Why You Might Need Life Insurance:
Life insurance needs will largely depend on your individual situation. This is usually down to the people who depend on you and would be affected financially in the event of your death. If you have no dependents, then life insurance is probably not necessary for you right now. The same applies if you are not generating a significant part of your family’s income; for example, if your partner’s income pays the bills. If your salary is what the family relies on to pay the mortgage and bills, pay school fees and put your children through college, you should think about life insurance as a means of making sure these financial commitments are covered in the event of your death.
How Much Coverage?
It can be difficult to apply a rule of thumb to how much life insurance coverage you will need as this will depend on a wide range of factors, including your income amount and source, the number of dependents you have, if you have any debt and how much, and your lifestyle. In general, most people consider getting a policy that would be worth between 5-10 times their annual salary in the event of your death.
Types of Policies:
There are many different types of life insurance policy to consider, including whole life or permanent, term, variable, and universal life. To help you learn what each one means, check out this article from Insurance Geek on the differences between term vs permanent insurance. Permanent, also known as whole life, offers both a death benefit and a cash value but tends to be much more expensive than other types of life insurance. The premiums will stay the same until you have paid off the policy, and it will be in effect until your death even after you have made all the payments. Term policies, on the other hand, tend to be cheaper because they offer a death benefit but no cash value. They are mainly recommended by experts for those who are under the age of forty and do not have any family disposition for life-threatening illness.
Which life insurance policy is the best option for you? When choosing, keep a range of main factors in mind such as your age, health, income, and number of dependents.