how to choose life insurance

How to Choose Life Insurance: A Guide to Finding the Perfect Policy

If something happens to you tomorrow, will your family be taken care of financially?

If you don’t have life insurance, you’re not alone. Actually, 37% of households in the United States are without some kind of life insurance. That means that it could be detrimental to many families if the breadwinner passes away.

If you’re considering life insurance, there are a lot of options you’re probably being presented with and it can be very stressful and confusing. To better understand and pick the right policy, check out these tips on how to choose life insurance.

Understanding Life Insurance

Life insurance is vital for most households. It is one of the pillars of finances that takes care of final expenses, outstanding debt, and lost income of the family. Having the life insurance talk isn’t a conversation anyone enjoys having but it’s important to make sure loved ones are protected and taken care of.

It’s important that you know how to choose a life insurance policy that best fits your needs. Life insurance can be confusing. You need to know that you have options and it’s important that you fully understand the process and what each type of insurance entails so you know what you are getting.

When you are wondering how to pick life insurance, it’s important to know that it is possible to find great and affordable life insurance. Do your homework and find the policy that’s best for you.

Do You Need Life Insurance?

Everyone may not need life insurance as everyone’s circumstances are different. Do you have dependents? Are there people in your life that depend on you and your salary? If the answer is yes, you probably need life insurance.

Even if you are a stay at home parent and don’t bring in an actual salary, you may need life insurance because your spouse would most likely need to find childcare to replace you caring for the children.

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How Much Life Insurance Do You Need?

After you determine that you need life insurance, the next step is to determine how much you need. When figuring out how much life insurance you need, you should figure out all of your expenses.

A general rule of thumb is to choose a policy that will cover five to ten times your annual salary. For example, if you make $50,000 a year, you would want to consider getting a policy of at least $250,000. That way your family will be taken care of for the first few years after you’re gone.

Term Life Insurance

When it comes to how to pick life insurance, you need to decide what kind of insurance you need. One option is term life insurance. Term life insurance lasts for a certain term. After the set number of years is up, if you are still alive, there is no payout.

Term life is the most affordable way to take out life insurance. However, it’s totally possible that you could outlive your policy. If that happens, you would need to take out another.

Whole Life Insurance

Another option is whole life insurance. Whole life insurance has a “cash value” that builds over time.

Whole life insurance doesn’t expire. You need to be sure to make your regular payments and you’re taken care of. Whole life can be expensive for some people, however.

When deciding between term life vs whole life, it just depends on your financial situation and lifestyle. Both types of life insurance are typically income tax-free with fixed premiums. Whole insurance can help build equity while term life cannot.

How to Choose a Life Insurance Company

You are not short of options when it comes to choosing a life insurance company. There are hundreds to choose from. There are a few things you should ask when making your decision.

  • What are the life insurance products available with the company?
  • Are they financially stable?
  • Do their rates compare with other life insurance companies?
  • What is their reputation?
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You want to be sure that whatever company you choose, they have great customer service and will provide the promised finances to your beneficiaries if and when something happens.

Ask Questions

Don’t be afraid to ask questions. This is an important decision to make and not one that you should take lightly. Seek the advice of a financial advisor. Ask for tips on saving money and getting your finances in order so that you can better afford the life insurance policy you want.

Some questions you may not think to ask:

  • How much will monthly payments be?
  • What happens if I miss a payment?
  • Is there a grace period?
  • Will there be a physical exam prior to coverage?
  • How are life insurance policies paid out?

Asking these questions ahead of time can save you time and money.

How to Choose Life Insurance

It’s so important that you know how to choose life insurance. Getting and choosing the right life insurance is vital to protect your family. No one likes thinking about these types of things, but it is a necessity of life. Knowing how to choose a life insurance policy can make the process much easier.

You need to know what type of insurance you need and pick a policy with a reputable company that you can trust. Don’t hesitate to ask them questions so you are totally confident and comfortable in your decision.

If you want more helpful hacks and tips in regards to finances, be sure to follow our money and finance tips blog.