While life insurance is critical for your family’s financial security and well-being, if you’re like the majority of people, the prospect of looking for the correct type of coverage might be intimidating. Fortunately, these eight straightforward methods can assist you.
1. Determine if you truly require life insurance.
While the majority of individuals do, not everyone does. If no one financially depends on you, if you have no debt, and if your estate would have enough cash to cover its own taxes and expenses, you generally do not need life insurance. If you do not fulfill these requirements, you will almost certainly require individual life insurance.
2. Determine the amount of life insurance you require.
There are two critical questions to consider:
What financial resources would your survivors have available to them following your death? Consider three distinct sorts of resources for simplicity’s sake: (1) Survivor payments under Social Security and other retirement-related programs; (2) group life insurance; and (3) other assets and resources. It’s also critical to understand when these resources will become available—for example, social security survivor payments are given immediately to a surviving spouse with dependent children, but only after the surviving spouse reaches the age of 60 if there are no dependent children.
What financial requirements would your survivors have following your demise? Consider three distinct sorts of needs for simplicity’s sake: (1) final expenses; (2) financial obligations; and (3) income requirements.
Subtract your survivors’ financial resources from their financial needs (step #3) to determine the size of the policy to purchase. Numerous people are underinsured, frequently as a result of skipping these processes or taking a shortcut (such as simply buying a multiple of annual income). Additional assistance in choosing the appropriate amount of life insurance is available at: How Much Life Insurance Do I Need?
3. Take into account any other aims you may have for your life insurance.
Certain types of life insurance plans have a savings component that may be utilized for purposes other than death benefit payment.
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4. Determine the sort of life insurance that is most appropriate for your circumstances.
In essence, life insurance policies are classified into three categories: term life, whole life, and universal life. If you require insurance for a limited length of time or have a limited budget, a term policy with cheaper premiums may be the best option. If, on the other hand, you require insurance for the whole of your life and wish to save, a whole or universal coverage may be a better option.
5. Determine whether any “riders” to the policy are required.
There are two options to consider: premium waiver and assured insurability. Certain plans contain one or both of these coverages as standard, but if they do not, it is generally a good idea to add them. If you become disabled, the waiver of the premium pays your life insurance policy premiums. Guaranteed insurability enables you to increase your death benefit without giving further evidence of good health.
6. Do some window shopping
There are numerous ways to save money when purchasing life insurance, but not all of them include instantly paying a cheaper premium. Nonetheless, life insurance is a very competitive industry, and quotes can vary considerably between organizations.
7. Determine whether to pay premiums on an annual basis.
In most circumstances, paying annually is preferable to pay in installments, as there is sometimes a hefty surcharge for paying smaller amounts more frequently.
8. Inform your beneficiaries of the existence of your life insurance policy.
Once the insurance is issued, notify your beneficiaries of the firm that issued it, the location of the policy’s paper copy, and any particular instructions regarding how you want them to use the death benefit. While it is uncommon for individuals to be ignorant they are the beneficiary of a life insurance policy, it does happen, and you want to ensure the benefit is not lost. Additionally, store your paperwork in a location that is easily accessible to your beneficiaries.