Getting life insurance can be an overwhelming process because along with figuring out the right policy for you, it also forces you to consider the effect of your death on your nearest and dearest. Today, life insurance is still something that most of us don’t think about, even though in many households, the loss of the primary wage earner would significantly impact the entire family within just a couple of months. Here’s how to choose a life insurance policy that’s right for what you need without breaking the bank.
Understanding the Different Types of Life Insurance Policy
Having a better understanding of the different life insurance policies available is crucial when it comes to determining which is the best choice for you and your family’s needs. The different types available are:
- Term life insurance. This policy is purchased for a specific period, usually between ten and thirty years. There is no cash value and the policy will usually expire at the end of the term, unless it is a convertible policy. This is the least expensive and most popular life insurance option.
- Whole life insurance. This policy has a set premium and no fixed term. It remains valid for as long as you continue to pay the premium. It’s also known as ‘permanent’ life insurance.
- Universal life insurance. This is also a type of permanent life insurance and includes various investment options. Your premiums may be reduced over time, for example, based on how you decide to manage the policy.
Many people believe that they will need to choose a particular type of life insurance policy over another, but this is not always the case. It may be worth considering the option of combining both types of insurance. This could be a better option financially over time since your life insurance needs are likely to change as you age.
Determining How Much Life Insurance You Need
People purchase life insurance for various reasons. How much you will need will depend on your personal reasons for getting cover. If you’re planning to get life insurance in order to ensure that your family’s financial needs will be covered in the event of your unexpected death, you will need to consider various personal factors to figure out how much you will need.
Consider:
- How much income would your family need per year to replace your lost income?
- Would your spouse work after your death? How much income will they contribute?
- Do you need to provide funds for your children’s education?
- How much debt do you or your family have?
- What other expenses would your family face as a direct result of your death?
- What investments and savings do you have that your family could use?
Finding a Suitable Policy
Once you have determined the right type of life insurance policy for you and the amount of cover that you want to purchase, searching for the right policy can seem daunting. There are various options available, and it’s wise to do your research so that you know you are getting what you need at the right price. Thankfully, the internet has made it easier than ever to find the right life insurance policy for you; comparison sites are a great place to start.
There are many comparison sites available to use for countries all around the world, for instance, you can get comparative quotes from South African companies here. You can use them to weigh up your options and find a policy that’s the best fit for your requirements. Just enter your details and requirements and they will provide a range of options for you.
In some cases, you might find that it’s a better option to work with an independent broker. This is usually the case if you have factors that tend to drive up the price of life insurance, for example, if you work in a high-risk job or have a pre-existing health condition that could put your life at risk. A specialist broker can recommend the best insurers for your situation and help you find a better deal compared to what you’d get searching online.
The Bottom Line
There’s certainly no shortage of options to choose from when it comes to getting life insurance. When deciding on the type of life insurance you need, there are several personal factors to take into account including your age, health, current financial situation, and more. Keep the following in mind:
- Term life insurance can be used for short-term needs combined with whole life insurance to save money in the long run, particularly if you are just starting out.
- Don’t stick to the same policy. It’s a good idea to review your life insurance choices every few years or when your family situation changes, for example, if you pay off the mortgage or fund your child’s college education, leaving fewer future expenses for your family to face after your death.
- Finally, it’s worth getting some guidance from a professional life insurance or financial advisor if needed.
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