Top 4 Factors to Consider When Choosing Life Insurance Policies
Choosing life insurance policies can feel like a serious matter.
No one likes having to think about life insurance, but it’s something that’s better to sort out sooner than later. Once you’ve got a good one in place, you can rest easy knowing that your family will be looked after should anything happen to you.
If you don’t know much about life insurance providers or policy terms and conditions, however, it can be overwhelming. It’s all about understanding your options when it comes to life insurance. In this post, we’re going to give you a hand by telling you 5 factors to consider when choosing your life insurance policy.
1. Policy Type
There are two main types of life insurance policy, term life insurance, and whole life insurance. Term life insurance is exactly what it sounds like, you pay your premiums for a set number of years (5, 10, 20, 30, etc.) and if you pass during the term, your family will receive a death benefit. If you stop paying the premium, you’re no longer covered.
The other type is whole life insurance. With this, there is no end date, so you’re covered from the day you sign up until the day you pass away. Over the years, you’ll build a cash value, which can either be distributed to your loved ones or cashed out once it reaches maturity.
Term life insurance is more affordable, but if you’re looking for a more serious policy that goes to your family members, whole life could be better.
2. In-Depth Pricing
When you’re signing up for a life insurance policy, you’ll want your insurer to take every possible price-affecting factor into account. Your life insurance price should vary based on the life choices you make.
If you’re a generally healthy person with healthy habits, then your premium payments will be cheaper. If you’re talking about life insurance for military families, you’re going to need something more specific.
3. Using the DIME Method
Figuring out how much you need versus how much you can afford per month can be annoying, especially if you’ve got numerous other expenses. At the end of the day, you don’t want your life insurance needs to get in the way of your quality of life now. The DIME method can help you tackle this issue by figuring out exactly how much insurance you should have in your situation.
“DIME” stands for Debt, Income, Mortgage, and Education. If you add up your existing debt, your annual income (multiplied by the number of years you’ll have dependents living off of it), your remaining mortgage balance, and future education costs, then you’ll have a base number to go off of. From there, you can factor in things that are more specific to your situation and get a good sense of how much insurance to get.
4. Converting Your Policy
When shopping for policies, finding an insurer that allows you to convert your policy will give you flexibility in the future. All that this means is that should you come to the last few years, you’ll have the option of converting your term policy into a permanent one.
The reason that this is helpful is that it prevents you from having to find a new policy in 20 or 30 years, when you may have developed health concerns, which would make it harder to find good policy terms.
Take Your Time Choosing Life Insurance Policies
Choosing life insurance policies is a big decision, so don’t be afraid to take your time and shop around for one that suits your family’s needs. When you’ve got good life insurance, you can relax knowing that your family will always be looked after.
Did you find this post helpful? Come back for more on personal finance and insurance.