In reality, many people think that taking out a life insurance coverage comes with a complicated process. As a result, the surviving family members end up paying their deceased loved one’s debts at the time of death. Therefore, whether you’re single or married, getting a life insurance policy is extremely important.
Being one of the vital aspects of personal finance, life insurance can offer maximum financial protection for your family at the time of your death. When you have this financial safeguard in place, you can rest knowing that any of your surviving family members will not shoulder all your debts and other monetary liabilities.
If you consider getting a life insurance policy today, here’s everything you need to know about it and the things to remember when choosing the right plan for you and your family’s needs.
Life Insurance: What Is It?
Typically, a life insurance policy refers to a financial contract executed between the policyholder and the insurance company wherein the former is required to pay the premiums. Its primary objective is to provide death benefits to the beneficiaries named in the contract at the time of death of the policyholder.
Just like other financial services, a life insurance policy serves as financial security for the surviving family members after the policyholder’s death. Over the years, the policyholder or the insured will have peace of mind knowing that some money will be given to the family to pay off the existing debts and estate taxes, cover the burial expenses, replace the spouse’s lost income, and many more.
Moreover, a typical life insurance policy comes in different types depending on the needs of the policyholder’s family. After all, not all policies are equal in terms of the costs, effectivity, and other pertinent provisions. In such a case, it’s essential to know and understand the different types of life insurance policies to help you choose the best coverage that will work best for you.
Below are the different types of life insurance you can consider from the get-go:
- Term Life Insurance Policy
If you’re looking for a life insurance policy that works for a specific period ranging from 10 to 20 years, then taking out a term life insurance can be an excellent idea. Under this type of life insurance, the policyholder will have to pay the premium required for the period you choose. Once the period expires, the insurance company will provide you the option to continue the coverage but for a higher amount of premium payment.
Unlike other types, a term life insurance is much more affordable. Not only that, but you can also have the opportunity to select the term length and coverage amount that suits your budget. Another good thing about this life insurance coverage is the guaranteed payout it provides to the beneficiaries of the policyholder.
- Whole Life Insurance Policy
If you want a lifetime of life insurance coverage, getting a whole life insurance policy can be the best option. This type of coverage is permanent as it covers the entire lifetime of the policyholder. Although you need to pay higher premiums, having a whole life insurance policy allows you to provide financial protection for your family members that usually last for a lifetime. Also, when you get this type of insurance, you can earn cash value, which you can utilize whenever you want.
- Universal Life Insurance Policy
Another type of permanent life insurance to know is universal life insurance. This type of coverage is intended to last for a lifetime. But compared to whole life insurance, a universal life insurance policy comes with flexible premium payments such that you can increase or decrease your coverage payments during the course of your life.
Despite the flexibility, taking out this type of insurance requires higher payment rates than a term life insurance. Also, the funds under your policy’s savings section can be used as an investment in order to provide cash value to the policyholder.
Now that you know the common types of life insurance coverage, the next thing to remember is the requirements needed for the application process. When you apply for life insurance, you need to provide the necessary information such as your name, employer, address, date of birth, financial information, and many more.
Aside from your personal info, the insurance company will ask you to undergo an in-person medical exam to ascertain your health condition or lifestyle. And if the company finds out that you conceal some critical information about your health, they’ll raise your premium, cancel your coverage, and in extreme cases, reject your beneficiary’s claim. Fortunately, you can apply for a life insurance policy without taking a medical exam. Just look for a reliable insurance company that requires no exam before you can apply for coverage.
Life Insurance: Things You Need To Know When Choosing One
Once you learn what and how life insurance works, the next thing you should pay attention to is making the right choice. With the different types of life insurance policies, choosing the best option is crucial to your family’s financial future after you pass away.
Here’s everything you need to know when selecting a life insurance policy that fits your family’s needs.
Length Of The Insurance Policy
When choosing the right insurance coverage, it’s essential to consider the period of your policy. To determine the perfect duration, ask yourself how long you probably need your life insurance policy.
For example, if you have a mortgage or other debts to pay within 20 years, then taking a 20-year term life insurance policy might be the perfect option. Also, the amount of coverage you want should be considered when identifying the length of time you need for the policy. If you’re looking for higher coverage, you might want to keep a shorter term of insurance to ensure it’ll fit your budget.
Cost Of Life Insurance
Depending on the type of insurance you want to take, you probably have to spend a few dollars to many hundreds in a month. That said, knowing the amount of cost you’re going to pay for the insurance policy is important. While most insurance providers offer flexible premium payments, the actual amount you need to pay depends on some factors such as the inclusion of cash values, duration of insurance, medical history, age, and many more.
So, if you want a life insurance policy that doesn’t hurt your wallet or bank account, be sure to factor in the cost of the insurance before making a selection.
Sometimes, the goals you have in life can impact the type of life insurance you’re going to take to protect your loved ones in the event you pass away. That’s why before you pick your choice, it’s best to reflect on the life goals you want to achieve in the coming years.
For instance, if you want to have children, you might need to get life insurance with a higher amount of coverage. Aside from this, it’s also essential to determine your career, income goals, and target retirement date to ensure you pick the appropriate policy that will work best for you and your family.
Insurance Underwriting Considerations
In some cases, insurance companies assess the health risks of their potential clients before they decide the amount of life insurance coverage they should get. Due to this setup, you need to talk to your provider and check whether they apply the standard underwriting considerations.
For example, if you’re healthy, insurance companies will not hesitate to offer you the most preferred rates for the coverage you want to choose. But if you have underlying medical conditions, chances are you might not qualify for a life insurance policy, and in worst cases, they’ll deny your applications.
Luckily, there are life insurance policies that no longer require medical exams to ascertain your health conditions. This means that even if you’re not subjected to a medical exam, your beneficiaries will still receive the benefits under the policy.
Cost Of Waiting To Take Out Insurance Coverage
When you choose a life insurance coverage, you also need to take into account the cost of waiting to buy coverage. Although you might feel that it’s too early to take out a policy for yourself, it’s best to evaluate your need so you and your family can get the most out of your coverage when death arrives.
Remember, the number of premiums you’re going to pay is calculated based on your age and the term of the insurance. And since you’re not getting younger anymore, look at the possible costs you might pay in the event you postpone your purchase in the coming years. This can help you determine which type of policy is ideal for your circumstances.
However, if you want to establish the financial protection for your loved ones as early as now, ask help from an experienced insurance agent, and they’ll assist you in making a great choice.
Again, a life insurance policy protects your loved ones from financial burdens that might come because of your death. Since life insurance is considered financial security, it’s always worth it to educate yourself about it and the things to keep in mind when choosing the right policy.
And if any of the information mentioned above is confusing, don’t hesitate to talk to a professional insurance agent to help you get the type of life insurance policy you need and make the process of application as smooth as possible.