It’s never too early to start thinking about life insurance. Accidents and illness can happen at any time and planning to protect your family now ensures their protection in the future.
Before you start shopping, you may have some questions. What is life insurance? What is the difference between term life insurance and a permanent policy? What types of life insurance are available for me and my family?
Asking questions is a great place to start, and PolicyPilot can help get you the answers you need. Once you have those answers, you can start searching for the right life insurance company.
Life insurance coverage can vary by a myriad of factors. When you set out to choose the right policy for your family, here are five important facts you should consider first.
1. Life Insurance Coverage, Cost, and Affordability
The cost of your life insurance policy will depend on the amount of coverage you need. It’s important to determine how much money you or your family will require in the event a claim is filed. Use the DIME formula (debt, income, mortgage, education) to calculate your expenses and the minimum coverage amount. Be sure to account for and add in expenses for college or other potential future needs.
Once you know how much life insurance you need, you should shop around for quotes. Consider looking into whole life policies as well as term life policies. Whole life policies offer flexibility in accessing benefits, whereas term life only pays out upon the death of the insured.
In addition to seeking out the right amount of coverage, you should take a look at the annual premium for your life insurance policy. If you choose an affordable policy with coverage that meets your needs, you’re more likely to keep the policy rather than cancel due to a change in your budget or other financial circumstances.
2. When the Full Payout Is Available
There are many different options to purchase life insurance. If you’re looking for affordable life insurance, or you want to find a policy that doesn’t require extensive exams or paperwork, you can access a simplified issue policy. One thing to keep in mind with a simplified issue policy is that 100 percent of the policy value may not be accessible for a certain number of years, usually two or three after purchase.
Knowing how soon you anticipate accessing your life insurance policy will help you make an informed decision on whether a standard policy or a simplified issue policy is right for you.
If you’re a young, healthy adult who will not need to access your policy proceeds for a number of years, a simplified issue policy may be a good place to start.
Before you purchase a policy, find out the exact terms on the payout and look for a policy that offers 100 percent payout, as quickly as possible, to ensure you and your family are covered in case of an unexpected event.
3. Living Benefits
There may be a time when you want to access your life insurance policy for illness or other issues. Some policies offer access to benefits while you’re still alive as long as you meet certain criteria.
If your children no longer need coverage and you’ve covered other after-life expenses like mortgage, debts, and other bills and expenses, it might be worth accessing a portion of your policy and reducing unnecessary coverage.
End of life care, assisted living facilities, and long-term medical treatments are just some expenses that could be covered using a portion of your life insurance premium.
Shop around to determine which life insurance policies offer the benefits that will suit your family now and over time.
4. How Much Do You Need?
Purchasing more life insurance coverage than you need can become a financial burden, leading to the cancellation of the policy and potentially no coverage. If you’re purchasing life insurance, use a life insurance calculator to help you determine exactly what expenses should be considered when saving, and how much you should allot for children or other dependents.
You can purchase additional life insurance at any time, so it’s a good idea to at least start with the minimum coverage and increase with additional policies as needed.
Cheap life insurance often has strings attached regarding payout, timeframes, and what events may or may not be covered. Before you purchase based on cost alone, make sure you’ve outlined exactly what you need in terms of coverage and accessibility.
5. One Policy or Multiple
There are pros and cons to purchasing either one policy or multiple life insurance policies. Purchasing one policy means you will only have one premium to pay. Your beneficiaries will only have one company to deal with and one benefit to access. It makes the paperwork less, and the process simpler. Keep in mind that purchasing only one policy can mean that your payout is limited to the coverage in that policy, there may be a waiting period, and the policy might not offer any living benefits.
Purchasing multiple policies offers the flexibility for different levels of coverage at different times, whether for end of life care or after-life expenses. You can vary your coverage with some policies that offer living benefits, some cheap life insurance, and some term policies that cover basic needs and expenses. Having multiple policies, however, translates into multiple companies to deal with, lots of paperwork, and additional annual or monthly premium payments.
Different Types of Life Insurance To Suit Your Needs
Before you purchase life insurance, take a look at your expenses. Determine the amount of money you want your family to have in the event of a loss. Look at your monthly expenses to also help you decide how much you can afford to pay monthly or annually for coverage. Purchasing a plan that fits into your current budget makes it more likely you will keep the plan if financial downsizing were to take place.
There are many different types of life insurance available to meet you and your family’s needs. Finding the right policy, or policies will depend on your financial status, your health, and the events you anticipate in the future, like college for your children, or funding care for a dependent parent or adult child.
Once you’ve made the decision to cover yourself and your family, you can look into rates that fit your situation and expectations and find a policy that helps you feel protected.
Contact PolicyPilot to learn more about life insurance or other coverage.