Life insurance is an important part of any family’s well-being and financial stability. It is a good financial source for your family after your sudden demise.
But most people don’t know how to purchase the right type of family life insurance plans. However, the process of buying life insurance is not that daunting as you may think. Here are some simple steps to help you choose the best life insurance coverage:
1. Find Out Whether You Require a Life Insurance
Most people require life insurance but not everyone! If your family doesn’t depend on you financially, if there are no debts, etc., you may not need life insurance. However, if you’re in huge debt or your family relies on you financially, you probably require individual life insurance.
2. Calculate the Amount of Life Insurance You Need:
For this, you need to ask two major questions:
A. What financial resources would be left to survivors/families after your death? For instance, there are three types of resources: 1. Retirement-based survivor benefits and social security; 2. group life insurance; and 3. other resources and assets.
B. What financial requirements will your family/survivors will have when you die. It could also be considered with three categories of requirements: 1. debts; 2. final expenses; and 3. income needs.
After that, subtract the family/survivor’s financial resources (Step A) from the financial needs (step B) for determining the amount of life insurance policy you need.
3. Consider Other Objectives For the Life Insurance You Need
Certain life insurance policy plans include savings feature, which can be used for requirements other than the amount received after your death.
4. Determine Which Life Insurance Type Best Meets Your Requirements
There are three different types of life insurance policies, whole life, term life, and universal life. In case you require insurance just for a limited budget or for a specific period, a term policy with a lower premium is considered a good fit. However, if you require insurance to accumulate savings as long as you live, universal or whole life insurance policy may be a better option.
5. Determine Whether You’d Like to Add Any ‘Riders’ to Your Life Insurance
There are two types of riders to a policy, guaranteed insurability and waiver of premium. Guaranteed insurability enables you to include death benefit without any need of providing extra evidence that you’re in acceptable health. On the other hand, a waiver of premium offers life insurance premiums, if you’re disabled.
6. Shop Around
There are so many ways of saving money while buying life insurance; however, they don’t entail lower premiums immediately. The life insurance is a quite competitive business and its quotes also vary significantly depending on the companies. So, shop for a suitable policy as per your requirements.
7. Decide When to Pay the Premium
Mostly, it’s best to pay annually instead of paying in installments. This is because you will be charged more amount on smaller payments that you make frequently than the annual premium.
8. Inform Your Beneficiaries About the Life Insurance Policy
After the policy is issued, do inform your beneficiaries about the company from which you’ve purchased life insurance, where to find your paper copy, and other specifications about what to do with all the death benefits. The beneficiaries must be aware of the life insurance policy, as you don’t want the benefit to go unclaimed. Also, store the policy documents carefully so that they are only accessed by beneficiaries.