What to Know When Looking for Life Insurance

Life insurance is a contract you sign with a company to ensure the financial security of your family or dependents after your passing. You will make regular payments to the insurer. Upon your death, the company will help cover any financial gaps your absence may leave – such as mortgage payments, bills, and even funeral expenses.

Buying life insurance is one of the most important financial decisions in your life. It is a decision that many people hold off thinking is too big an investment and not worth it. The truth is that it doesn’t have to be a huge expense if you know what to look for and consider the financial benefit to your loved ones.

Unexpected events happen, so you must plan the future as best as you can. Here is what you need to know before choosing an insurance company.

Who Needs Life Insurance?

If you are single, young, and without kids, there’s not much need for life insurance.

However, those with a family who relies on them, or even a couple looking to start their own family soon, should consider life insurance. Recently, key employees such as CEOs of large companies are also thinking of life insurance as a financial guarantee for the business in their death.

In short, if someone will suffer financial loss from your absence, you should consider having life insurance. Even if your family can support themselves and they’re not entirely dependent on your income, minimal coverage is appropriate to cover the unexpected costs your passing will leave – such as the funeral and associated expenses, as well as unpaid debts.

Terms to Know

When purchasing your life insurance, you will hear a series of terms that you probably aren’t familiar with. Here’s what you need to know about them:

  • Death Benefit– This is the most critical aspect to consider: it’s the amount that beneficiaries are paid in the case of the policy holder’s death.
  • Premium– The name given to the value that you will pay over time. Regardless of how much premium is paid, the combined amount will be paid in full. Premiums are determined by many factors, such as policy type, health record, and financial status.
  • Cash Value– When you purchase permanent life insurance (see below), you are entitled to this option. It’s like a savings account that can be drawn from. Interest fees typically apply.

Types of Life Insurance

There is a wide range of policies and different coverages. But the basics you need to know is that plans are divided into term life insurance and permanent life insurance.

Term life insurance covers the person over a period defined when signing the policy (two or three decades, for example). When this period ends, the coverage ends. These tend to be more affordable and have no value if you survive the contract (i.e., the stipulated period).

On the other hand, permanent life insurance covers the policyholder’s entire life unless they stop paying. Everything you invest in it will be refunded in case of death. This type of contract is divided into whole life insurance (a form that accumulates cash value) and universal, which also accumulates interest.

How Much to Pay

This depends on what you are looking to accomplish. Some people only want insurance to cover the end-of-life costs but not the support of dependents. If you have many people depending on you, you will want a more comprehensive policy to cover their expenses.

The amounts of paid premiums can vary depending on your age: younger people will pay less per month than a customer who is over 50 years old.

In addition, the insurance company will consider other customer-related factors, such as gender, weight, and health habits (if you are obese, if you have a history of illness in the family, if you smoke or have smoked in the past, etc.). Some companies require their clients to undergo a medical examination to qualify.

Where to Get Life Insurance

There are simple online platforms that don’t require medical exams. Research as much as possible about the company before signing anything. For example, you can take a look at a Bestow life insurance review to understand the company’s pros and cons better and see if it suits your needs.

Remember that some employers offer life insurance benefits, and sometimes you can also bundle life insurance with other existing policies (such as health and homeowners insurance) to pay less. If you are confused as to what is right for you, financial advisors can help.

The ideal is not to make such an important decision considering only the lowest price. After all, it is your family’s financial stability in the future that will be at stake.

Death and Taxes

Popular wisdom says that the only certainties in life are death and taxes. One day you will no longer be here to support your family or dependents, and if your departure is unexpected, their financial situation can get complicated.

Think of life insurance as protection against the unexpected and a valuable investment. It’s a contract you make to ensure peace of mind for you and your loved ones, knowing that they will have financial security when the inevitable happens.