Before you invest in a Life policy, make sure that you get answers to these three key questions:
- How much coverage do I need? This will depend on a number of variables. If you have a spouse, children, or home, you’ll need more insurance than if you’re single and living in an apartment. Also, factor in the estimated costs of funeral expenses, personal debt, and – if you have dependents – loss of household income. The higher these costs, the more coverage you’ll need.
- What type of policy should I buy? While Life insurance comes in many flavors, Term and Permanent Life are the most common. Term insurance covers you for a specific period, usually one to twenty years. Although the premiums are generally far lower than those for Permanent Life insurance, if the term runs out and you wish to renew coverage, your premiums will go up.
A Permanent Life policy will cover you for your entire life. The premiums can be up to ten times higher than those of a Term policy for two reasons: 1) the insurance company is required to pay a death claim; and 2) Permanent Life offers a cash value savings component that sets aside some of your premium to earn interest. If you terminate the policy before your death, the cash value savings belong to you.
- How much insurance can I afford? Because missing premium payments can lead to termination of your policy, make sure that the amount and type of coverage you buy fits within your budget. This decision is basically a trade-off between increased benefits (through “riders” added to your policy) and the higher premiums that you’ll pay for this extra coverage.
Our Life Insurance professionals stand ready to offer their advice on choosing the policy that’s best for you and your family.