What Life Insurance should I get?

A common question that pops up on everyday search engines these days!  Making a life insurance decision is not as easy as advertisements make it seem.  There are so many companies, so many types, and how much life insurance do you even need?  Well, here’s a few pointers to help you narrow it down.

The amount

The reality is we all know one day we will die and life insurance is the one insurance that you can count on to pay a benefit, and you may purchase it at a few different moments in your life.  So the amount of insurance is perhaps the important factor to consider.  Items to consider to help you determine how much insurance you need, based on what stage of life you’re in, are things like your human economic life value, which is the amount of money you’ll earn over your life time.  Other questions to consider such as the amount of money you are currently earning, amount of debt such as a mortgage (which tends to be the largest debt people want to cover).  Other items to consider are things like childcare, the cost of college education, and final expenses. And lastly of course, is your budget.  Matching your objective for the right amount of life insurance with your budget is an essential factor to consider.

The type  

The world of life insurance can be broken down into two basic types; temporary and permanent.

Temporary life insurance, commonly known as term insurance, will last for a period of time.  That period can be anywhere from one year, five years, all the way up to 20, 30, and with some companies 40 years.  The cost of term insurance is relatively low and affordable.  The premium will remain level for the term length.  At the end of the term, it’s possible to renew the life insurance but it becomes extremely costly to do so.  Most people do not renew the term as it becomes very expensive to do so.  Term insurance is great for young people who are looking to get a large amount of life insurance at an affordable rate.

Permanent life insurance lasts for as long as someone is living and does not have any term associated with it.  The premiums tend to be higher than term insurance since the policy is expected to last longer than term insurance.  Permanent life insurance also includes living benefits which come in the form of accelerated benefits which allow early access to the death benefit for terminal illnesses, and in some cases can generate a cash value savings component.  These benefits are not available on term products.  Cash values will grow based on various underlying performances an can provide tax efficient savings for down the road.  There a number of different types of permanent life insurance policies available.  A licensed life insurance professional can help you navigate the ins and out of permanent insurance.

The cost

The cost of life insurance is determined by your age, your gender, and a health rating which is determined by an underwriting review.  The health rating can range from standard for the average healthy person, to preferred for those healthier than the average person, and substandard for those who might have underlying health conditions that qualifies them below an average healthy individual. The exact cost of life insurance cannot be determine until an underwriting review is complete and often times people misjudge a quoted health rating before completing underwriting.

Ask for advice

While there are many resources available to purchase life insurance on your own these days, purchasing the right type and the appropriate amount of coverage can be difficult to navigate on your own.  Consult with a licensed financial professional to determine which life insurance type and amount is suitable for you and your family.