Life insurance is an essential tool that can help provide financial stability to your dependents after your passing. Purchasing life insurance isn’t something we look forward to and the process can be confusing. Read on for our guide to how to compare and buy life insurance.
Compare the Market
While regulated by state governments, insurance quotes vary depending on factors like underwriting class, coverage, term, lifestyle risks, and the applicant’s health. Wrongly defining these factors at the time of signing up could leave you with inaccurate quotes. With plenty of insurers to choose from, insurance agents and online comparison sites can help steer you in the right direction.
Decide on Insurance Type
Depending on your needs, you could select from two kinds of life cover. These include:
Whole Life Insurance
These policies offer coverage throughout the life of the insured. You also get a savings component or a ‘cash value’ along with a set coverage amount. Such insurance offers a guaranteed minimum annual growth rate. As fees are often high, while considering this type of insurance, check if the policy comes with a maximum fee clause.
Term Insurance
Ideal for protecting your family from financial stress, this ‘pure insurance’ provides coverage for a predefined period. Paying a monthly premium ensures that it pays out a pre-set benefit on the policyholder’s death.
Define Your Coverage Needs
The ideal coverage amount varies according to individual needs. Selecting the right coverage depends on personal factors such as outstanding debt, a retirement fund for a spouse, and replacement of lost income. Insurance experts suggest getting coverage equal to 10-15 years of your annual income.
Select a Term
With term insurance, it is essential to select a term that provides an ample safety net till you meet your financial obligations. Insurers offer terms in increments of five years ranging from ten years to up to 30. While buying longer-term insurance means that you’ll end up paying more premiums, one that’s too short could cost you more at the time of renewal.
Using the tips in this guide, you can soon be on your way to buying life insurance to protect your family from financial burden when you’re no longer around.
