3 steps to decide what life insurance you need
By: Brandon Babcock
When you buy life insurance, you want coverage that fits your needs. And deciphering policies can be tricky. We’re sharing three steps that can help get you on the right path:
1. How Much and How Long You Need
First, it’s helpful to know how much life insurance you need, for how long and what you can afford to pay.
These are just a few of the questions to consider. Questions that you may find easier to navigate with the help of an insurance agent or financial professional.
The main reason to buy life insurance, of course, is to take care of the financial impact of an unexpected death. What are your family’s current liabilities? How much money would it take to cover for your lost income if you were no longer there to provide for them? Do you need the coverage to be permanent or just until your kids are out of the house?
Life insurance can also be one of the many ways to help you plan for retirement. If you can afford a more robust plan, it could serve double duty.
Get connected with a financial professional to help you decide what life insurance you need.
2. Explore Your Options and, with a Financial Professional, Choose One that Suits Your Needs
Next, it’s important to weigh all of your options. Learn what kinds of policies will meet your needs and, working with your financial professional, pick the one that best suits your situation.
How long do you need coverage?
Term – Term coverage is more affordable and lasts a certain number of years or until you reach a certain age.
Permanent – Whole life and universal life insurance are types of permanent coverage; it pays out when you die, no matter how long you live.
If it has cash value, how would you like it to grow?
Variable – The cash value is invested in the market, typically via mutual funds, and its value can rise or fall with the market.
Fixed indexed universal life – Your premium is always 100% protected against losses due to market downturns, but your cash value can be allocated to market-linked index accounts that credit you with a portion of the underlying gains.
Whole life – Some whole life policies may include the ability to grow cash value, and this can be earned through dividends determined by the company.
Universal life – The growth of your cash value is connected to the earnings of the specific company issuing your policy, rather than being credited by an external index.
What other features are important to you?
The option to convert your term policy into permanent insurance later
Ability to take loans/withdrawal
Living benefits in case you get seriously ill or battle a terminal illness
Flexibility to change your coverage or your premiums as life changes
These are all important factors to consider when comparing policies.
3. Choose Your Policy Features
After you’ve decided the base policy that will work for you, how much coverage you’ll need and the resulting premium that will slide into your budget, you have a few more decisions to consider in your discussions with your financial professional.
Most life insurance policies come with add-on features and benefits known as riders. Among many other things, riders can help you:
Provide additional money to your loved ones if you were to die in an accident
Keep your policy in force if you’re permanently disabled and unable to pay your premium
Add coverage for your spouse or kids
Overall, it’s a great idea to ask a life insurance agent or financial professional to help you through this process. They can help you review your insurance needs and find a good plan that fits your budget and your unique needs