In today’s difficult economy, it is important to find the right type of life insurance that will suit your needs and fit into your budget. This decision does not have to be difficult so long as you take three things into consideration. You need to determine the amount of coverage you need, the length of policy you desire and which policy fits your unique situation.
How Much Insurance Do You Need?
The first thing you need to do when determining what life insurance would be best for you is to decide how much coverage you think you may need. There are four steps to this process. The first step is calculating your immediate needs. This typically includes final costs and any debts you may have.
Final costs consist of such things as hospital bills, funeral costs, executor fees, lawyer fees, taxes due and probate court costs. In short, anything that must be paid upon your passing. Next, you need to calculate the costs of any long-term financial obligations you may have. This can include loans, mortgages and college tuition payments.
Now, you will want to determine your family’s yearly maintenance expenses and multiply the figure by however many years you would like to support them. Finally, add the expense amounts from each of the above three steps and subtract your net worth. If you receive social security, subtract these payments as well. The final figure is how much life insurance you need.
Determining the Length of Policy You Need
After you have calculated the amount of coverage you need, you must then determine the length of the policy you want. Term life insurance covers you only for a specific amount of time. The obvious risk of this type is that the coverage may expire before you have purchased another policy. However, the benefit of these policies is that they are much cheaper than others.
Whole life insurance, or permanent insurance, covers you for your entire life. While these policies are more expensive than term insurance, whole life builds a cash value that you can borrow against if necessary. This cash value is tax-deferred and can increase significantly so long as you pay your premiums on time.
Choosing a Policy that Suits Your Needs
After you decide whether you want to purchase term or whole life insurance, you must then determine which policy will suit your unique needs. Meeting with an experienced life insurance agent can be very helpful when you reach this step. There are three types of term policies, and they are level premium, decreasing and increasing premium.
Level premium term consists of set premiums and allows for an increase in the policy every two years. Decreasing term is typically purchased by mortgage holders, and the policy decreases as the policy owner’s mortgage decreases. Increasing premium term includes policies that increase as you grow older.
There are three types of whole life policies as well, and they are single premium, survivorship and universal. Single premium policies are those that pay the total amount after one large initial payment. Survivorship policies are those where two persons are insured. Universal policies allow premiums and benefits to vary depending upon the needs of the beneficiaries.
Life insurance is an important investment for people no matter whether they are young or old. While it may be a bit confusing trying to choose a life insurance policy, there are some things you need to consider that will help you choose. The above tips can help make your choice easier and get you the coverage you need.
Authro: Brenda Panin – Follow her on Google+.