Shopping for life insurance may not be fun or exciting, but it is important. If you have family members who depend on you, it is important to have sufficient life insurance coverage in place.
Life insurance is designed to protect those you care about and give them the financial stability they need in the event of your death. If you have not yet thought about buying life insurance, now is the perfect time to get started.
Many people put off shopping for life insurance because they fear it will be too expensive. That is certainly understandable. After all, there are so many important things competing for your limited resources – from rent or mortgage payments to grocery bills to saving for college or retirement.
Sometimes it seems like adding another monthly bill is the last thing you want to do. The good news is that life insurance coverage can be surprisingly affordable. The only way to know for sure is to get out there and start shopping.
Decide How Much Coverage You Need
Before you can start shopping for life insurance, you first need to determine how much coverage you need. The amount of coverage you need will obviously impact the price you pay, so it is important to get this part right.
Every situation is different, but financial experts typically recommend carrying between 5 and 10 times your annual salary.
That means a person making $50,000 a year would need a life insurance policy with a death benefit of between $250,000 and $500,000.
That may seem like a lot of money, but that kind of coverage can be quite affordable, especially if you are young and healthy.
Buy Your Policy When You Are Young
Life insurance is generally much less costly for young people, so buying your policy when you are young makes a lot of sense. If you have determined that you need life insurance coverage, buying when you are still young and healthy can get you a much lower rate.
Term life insurance can be especially affordable for young people. Unlike whole life insurance, which has an investment element, term life provides a death benefit only. That simplicity translates to lower monthly premiums, so young people may be able to afford more coverage.
Consider a Shorter Term
Term life insurance is available for various time periods of 10 to 30 years. Opting for the shorter term can save you money and allow you to afford more coverage.
It is a good idea to look at your anticipated life insurance needs and choose a term that provides the protection you seek while balancing out how much you can afford.
If you have young children, a 20-year term can provide protection while they are in school and through their college years. If you have 20 years remaining on your mortgage, your term life policy can protect your family until the home is fully paid off. When the existing term expires, you can reevaluate your need for life insurance and act accordingly.
Shop Around
Every life insurance company uses a different set of criteria to evaluate applicants and set rates, so it pays to shop around. Sometimes an insurance broker can help you find the affordable coverage you need, but it is still a good idea to do some shopping on your own.
It is important to look at the financial health of each insurer when shopping around for coverage.
You want to make sure that the company will be there to stand behind its benefits if and when the time comes. There are a number of rating agencies that assess the financial health of companies offering life insurance, and the insurance commission in your state can help as well.
Seek Out Alternatives to Whole Life
Some people prefer whole life, which provides an investment element, to term life insurance. The problem is that whole life can be quite costly, especially when compared to a term life policy with the same death benefit.
If you want the advantage of whole life without the added costs, a universal life or index universal life policy may be a good choice.
Universal life uses excess premium payments to build up a cash value. That cash value is credited on a monthly basis. The amount of interest credited to the policy is determined by the insurer and spelled out in the terms and conditions.
Index universal life insurance ties the return of the investment to a popular benchmark, like the Standard and Poor’s 500.
Buying Life Insurance the Smart Way
There is no one life insurance that is right for everyone, and it is important to assess your own needs before you shop.
It is also important to examine and reevaluate your life insurance coverage from time to time.
Your need for life insurance, and the amount of coverage you require, can change over time. The more you know about life insurance, the easier it will be to get the most coverage at the lowest possible price.
