Thinking of the family, you’ve taken a moment to research life insurance, a wise idea indeed. Life insurance policies may sound as if they’re something only the old would need to think about. But, its utility extends far beyond the needs of the elderly. Here’s what you need to know about life insurance policies.
What’s the Difference Between Whole and Term?
First of all, there are two major types of life insurance policies.
A whole life policy covers you as long as the premiums continue being paid. In fact, they’ve even designed some with investment components, which build cash value. Using them puts some of what you’ve paid in premiums and invests it in the market.
Term life policies only cover you for set lengths of time, determined upfront. When creating a policy, you can decide how long the contract will be. Many insurance companies provide renewal options once the term has finished, too.
In general, a term policy will have lower premiums. So, it’s something to keep in mind while comparing options.
Who Needs a Life Insurance Policy?
Even though it has a ton of value, not everyone needs a life insurance policy. Single individuals without kids or debt might not benefit from a policy all that much. If you’re not a parent yet, we’d suggest getting one if the funeral would strain your family’s finances. Otherwise, they’re not the best investment you could make in that situation.
On the other hand, if you’re a provider, the story is much different. Have you thought about how your family would keep a roof over their heads if something were to happen? Being covered by a life insurance policy gives you peace of mind, knowing they’d be ok.
How Big Should Your Policy Be?
Let’s say you’ve decided to get a policy because your family means too much to let them go without. Now, it’s time to figure out how large your policy should be, without overpaying.
The general rule of thumb used by finance experts is to get one worth at least 10 times your annual income. Some even go so far as to recommend one that’s 15 times annual take-home pay. Truthfully, it depends on a person’s financial situation at the time of death.
Until you’ve paid most of your debts, it makes sense to maintain a larger policy.
How Are Premiums Calculated?
Premiums vary depending on several factors. One of the most important would be your age. The younger you are, the lower the premiums. Also, females generally pay less than males, assuming everything else is the same.
Your lifestyle and health can impact premiums, too. Living a healthy life can actually help reduce how much you’re paying for premiums. However, the only way to get an accurate idea is by requesting a quote. Plenty of places are offering instant life insurance quotes, fortunately.
As far as lifestyle factors go, insurance companies look at a broad range of things. For example, someone working in construction could have their premiums raised. That’s because companies charge more if someone is working in a dangerous occupation. So, it’s crucial to check with several places and ask for quotes. By doing that, you’ll find the best deal on coverage.
How Does Claiming a Policy Work?
Generally speaking, life insurance policies payout upon your death. So, it’s not something you really want to use. Getting one can help you sleep better, knowing your family is secure, though.
After someone dies, their beneficiaries have to file a claim. They’ll work with your insurance agent to finish up all the paperwork. Then, the policy will pay out whatever was agreed upon in the contract. Sometimes, it’s a lump sum, while monthly payments are used at other times.
Understanding Life Insurance Options
Life insurance is an important financial tool used to provide security to families. If your job has you working in dangerous places, a policy wouldn’t be a bad idea. It’d let your family know they’d be ok, no matter what. That’s the kind of security a family man should want to give their loved ones, too.
