Life insurance protects families if something should happen to the main breadwinner. Although discussing the possibility of losing a family member seems grim, it’s an important part of a family’s financial planning. Life insurance provides financial flexibility in difficult times, and can prevent the remaining family’s financial devastation if something happens.
Be sure to read over all of the information about the insurance plan that your company offers. You may find that it will not be enough. You may want to invest in an additional policy to be sure that your family is going to have enough money in the event of your passing.
Although term insurance covers you for only a specified period of time, it does have some benefits that may make it the right choice for you. Term insurance is vastly cheaper than whole insurance, costing hundreds of dollars a year rather than thousands. It is flexible in that you can choose to be covered for as few as 5 or as many as 30 years with coverage ranging from $100,000 to millions. For short term needs, such as children graduating from college or a mortgage being paid off, term insurance is ideal, especially if whole insurance is not in your budget.
When exploring the options for insurance, shop around. There are a number of factors insurance companies use to rate customers. Each factor carries a different weight. If you have negative elements, such as an addiction to nicotine, you may benefit from researching rates from many different providers.
Life insurance companies often charge cigarette smokers double the usual premium. A way to reduce the monthly cost of your insurance, is to quit smoking if you are a smoker. Another way to bring your premium down is to stay in shape. Physically fit, non-smokers are at far less risk for developing illness and diseases.
Many insurance brokers and agents get paid through commission. It is therefore to their benefit to sell you the most expensive package they can with as many riders as possible. Because of this, before agreeing to a specific insurance policy, you should get a second opinion. Make sure everything included is something that you actually need!
It is important to conduct your own independent research when deciding whether or not to invest in a particular insurance policy. It is important to verify that you can afford it, and that it fulfills your needs. Make sure you fully understand the different aspects of your policy.
Understand that most insurance companies offer a range of different payment options to your beneficiaries. If you think those you leave behind would be better off receiving periodic payments, then this is something you have to decide now. You can choose to give the lump sum or to break it up.
Calculate the appropriate level of insurance coverage needed before purchasing a policy. A good rule of thumb is to consider what the loss of your income would do to your family if anything happened to you and insure yourself accordingly. On average, coverage amounts should be high enough to equal about eight years of salary plus any other one-time expenses your family may face.
Know how your insurance policy will cover your home in the event of your passing. Your benefits will first go to cover your outstanding debts and a mortgage could easily engulf the potential benefit for your family. Check with your insurance company to make sure your policy is sufficient.