4 Things to Know Before Buying Life Insurance
When the time comes to buy life insurance, you need to know what all of your options are and how to compare policies to each other to find the best one for your needs. The problem is, there are a large number of life insurance options and numerous companies available that can provide you with the financial support you need. To help you, compare life insurance companies based on these factors and keep them in mind as you consider all of your options.
#1: Which Is Best – Term Life Insurance or Whole Life Insurance?
The first thing to know is that there are many life insurance policy options. The most basic form is term life insurance. It covers you for a specific number of years, usually ranging from 10 to 30. If you die when this term is in place, the company will pay your beneficiary a specific amount of money, called the death benefit. Those funds are paid to the person you name. If you do not die during this policy, it ends. You may be able to renew it or purchase a new term life insurance policy if you like.
Whole life insurance, also known as permanent life insurance, is another option. It provides you with coverage that is ongoing as long as you make payments on it. Most whole life insurance policies – including universal life insurance and variable life insurance - have a cash value. This is a value that the policy has that grows over time with each premium payment you make. Many of these policies will see the cash value grow during their lifetime and, as such, you may be able to borrow from it. Additionally, these policies may grow significantly that they may be able to pay you a portion of the cash value during your lifetime, such as during your retirement years, in the form of dividends.
#2: What Factors Impact Your Life Insurance Quotes and Rates?
There are many things that play a role in the life insurance quotes you get. The most important factor is risk. Life insurance companies are all about charging you based on how likely it is that you will die young. With life insurance rates, you will pay significantly less if you are younger. You will also pay less if you are healthy. The sooner you buy a life insurance policy, the less you will pay for the coverage during your lifetime. That’s important because it means you can often save a significant amount of money by purchasing a whole life insurance policy at a younger age before you get older and suffer a disease.
#3: Who Should You Name as Your Life Insurance Policy Beneficiary?
It is always important to choose life insurance based on your goals. If the policy is in place when you die, the death benefit can be used by the person you name – called your beneficiary – for anything they need. When choosing a policy, then consider what your beneficiary may need. You can name one person as your beneficiary with backups as well as choosing a trust to manage your proceeds to cover a group of people, such as your children. When buying coverage, determine how much you wish to leave these individuals, such as money to care for their needs for a set number of years or funds to pay off your debt.
#4: Look to the Details of Life Insurance Plans First
Finally, it is always a good idea to know as much as you can about the life insurance plans upfront. For example, determine if they offer a cash value and, if so, how much can the policy grow during the time you own it. Determine what all of the fees are associated with your policy, too. Most of the time, you also need to consider life insurance policies based on your needs right now, but also remember that you can change and update your policy from time to time as you would like to. With so many options, it is a good idea to work with your financial advisor when selecting coverage.