We spend our whole lives ensuring that those we love are safe and protected. We pay the mortgage, so they have a roof over their heads. We get them health insurance in case they get sick. And we install home security devices to protect them while they’re alone. But what do we do to protect them after we’re gone from this world? The best thing we can do to provide for our loved ones after death is to purchase life insurance for ourselves while we’re alive. Now, as important as life insurance is, you shouldn’t rush into buying it from the first company that catches your attention. If you’re interested in purchasing life insurance, you’ve come to the right place on the internet. Keep reading this helpful guide to learn beneficial information to carry with you when buying your life insurance.
1. Understand What You Need for Insurance
The first thing you should do before you can do anything else is determine your insurance needs. Keep the following tips in mind when figuring out what you need for life insurance:
Life Insurance is a Part of Your Financial Plan
Life insurance should be considered part of the overall financial plan for your life. Make sure to include long-term and future expenses, such as college, weddings, and retirement. Doing so will allow you to make room for costs later down the line, which comes in handy.
Add A Little Extra
When determining how much insurance your family will need when you pass away, you must keep a few things in mind. While you may make more money over the next decade or so, you’ll probably spend more money, as well. You also must consider rising costs and any inflation in the future, too. With that being said, don’t be afraid to add a little cushion to the amount you spend on insurance to ensure your spouse can maintain their lifestyle. They’ll thank you in the end when they don’t have to sell their home to make ends meet.
Speak With Your Family
Life insurance is one of those things you should discuss with your spouse before making a purchase. Run your numbers with them to see if they make sense. Also, ask your spouse if they feel you’ve left enough or if you are underestimating costs. Either way, make sure you discuss your ideas before making the purchase.
Several Small Policies
If you need more clarification about future costs or how much insurance to buy, you can always purchase several small insurance policies rather than one large one. This way, you can adjust your needs as the years go by.
2. How Much Coverage Should You Buy?
This can be tricky to answer, considering how many factors are at play. According to New York Life, there are several different ways someone can calculate how much insurance they’ll need to purchase.
- You can take your annual salary and multiply it by 8.
- You can multiply your annual income multiplied by the number of years that are left before your retirement kicks in
- You can also use a life insurance iselect calculator to estimate how much insurance you’ll need to purchase
3. Look at the Different Types of Insurance Available
A person can choose from two types of life insurance: cash value insurance and term insurance.
Term Insurance
Term insurance is valid for a determined period, such as 10 or 15 years. When you want to know how much insurance you need to purchase, consider how long you want your policy to last and decide accordingly.
Cash Value Insurance
Cash value insurance consists of whole life, universal, and variable life insurance.
Whole Life Insurance
Whole life insurance covers the expanse of your entire life. Since it lasts your whole life, you want to consider final expenses like burial costs. It’s also essential to consider future purchases, such as a house or increases to your salary.
Universal Life Insurance
Universal life insurance is a permanent life insurance policy that covers the person for their entire life. If the person pays the premiums and any other requirements, they can keep the same insurance until they pass.
Variable Life Insurance
Variable Life Insurance is a permanent life insurance policy with an investment option. Money can be invested, usually in mutual funds, and will be paid to your beneficiaries when you die.
4. Know What You Can Afford
To have life insurance, you must make the premium payments to maintain the insurance. If you’re unable to afford the premium on your life insurance, then you’ll have to reevaluate the policy you want to get. You may have to remove something or add less money, but you’ll be able to maintain the life insurance.
5. Shop Around
Shopping for deals whenever you make a significant purchase would be best. Whether buying a new car or planning a family vacation, you must attempt to find the best deal that suits your needs. This is especially true when purchasing life insurance to protect your loved ones after you die. Research local insurance companies in your area and write down the numbers for a few companies that catch your eye. Before making any phone calls, contact your friends and family to see if there is an insurance company they’d like to recommend. Once you’ve gathered all your research and phone numbers, it’s time to start calling. Make sure to ask the agents any questions you may have, so you can make an informed decision when you’re finished.
Buying life insurance is a significant decision for a person to make. Most of the time, when you’re making a purchase, you think of the immediate need. When purchasing life insurance, you must consider the needs that will arise years later. If you’re planning on buying a life insurance policy to protect your family when you’re gone, take these helpful tips along for the ride. Not only will you be happy with your new life insurance policy, but your family will be happy knowing they’re protected when you’re no longer around.