How to Choose the Right Life Insurance Policy

While contemplating our own mortality is rarely pleasant, it’s a necessity to provide security to the people most important to us. Everyone gets insurance for their car, health, home, and potentially business. While all of these things are important, what could be more crucial than your life? If you have dependents, such as a spouse or children, then it’s a good idea to look into life insurance, so you can have peace of mind knowing that they’ll be financially protected in the event of your death.

If you haven’t thought about a life insurance policy before, then there’s more to it than you may realize. There are different types of life insurance, and each one has its own pros and cons. You’ll also need to consider how much coverage you’ll need and what level of premiums you can afford. Here are important things to ask while considering the different life insurance options, so you’ll be ready to make sense of life insurance quotes online and choose the best policy for your personal situation.

How long do you need the insurance?

A term life provides coverage for a specified length of time. The length of coverage is often set in increments of ten years, but you may be able to find a policy that allows you to renew on a monthly basis in exchange for a higher monthly premium. It’s important to note that a term life insurance policy offers no value beyond the guarantee of the death benefit to your beneficiaries if you die during the term period. If you’re looking for a saving or investing component, you’ll need to look into permanent life insurance.

At the end of the term, you’ll have the option to either renew the policy or convert it into some form of permanent life insurance coverage. If you let the policy lapse, then your beneficiaries will receive no death benefit if you die during the lapsed time. The biggest pro of term life insurance is that it generally offers the best rates on premiums. This type of insurance can be great for those who just need to put children through school or achieve another financial goal, before letting coverage lapse.

Do you need additional value?

Some people want more than a death benefit out of their life insurance coverage, and they view their policy as a sort of investment vehicle. With a permanent policy, you can accrue cash value over the course of your life. The cash value will accumulate at a guaranteed rate, thanks to dividends, but you can speed it up by paying your premiums ahead of time. You’ll be able to borrow against the value of the policy, and you can even make withdrawals from it. You should note, however, that borrowing too much or taking too large of a withdrawal from the policy can eat into the death benefit.

If you need a mix of these options, you can look toward variable universal life insurance. This is a permanent life insurance policy that offers an investment component but often comes with low premiums, similar to term life. You’ll have a minimum cost of insurance to keep your policy active, and anything paid into it beyond that goes into the investing component, which consists of multiple subaccounts that act like mutual funds. Unlike a whole policy, the investment component here is completely separate from the death benefit, making management easier. The biggest disadvantage of this policy type is that the volatility of the market can make it hard to build cash value.

Once you have an idea of the type of coverage best suits your plans, you’ll be able to find plenty of good options online. Before committing to a plan, however, be sure to ask an insurance agent about any exclusions the policy may have.