Life insurance is a great way to protect your family from financial hardship should something happen to you. There are many factors to consider when buying life insurance cover. In fact, there are so many choices that it can be overwhelming. But don’t worry! This guide will help you figure out what type of policy is right for you.
When shopping around for life insurance, consider these five important factors when selecting your policy…
1) What kind of life insurance policy do you need?
Before you can take out life insurance cover, you need to have an understanding as to what type of policy you need. The most common types of life insurance cover are whole life insurance and term life insurance. Both policies have significant differences, such as premium costs and the length of cover,
Whole life insurance provides cover for the rest of your life. When you die, the policy pays out a cash lump sum to your loved ones, helping them cover living costs and other expenses. If you’re looking for long-term cover, then whole life insurance may be the best option for you.
Term life insurance only covers you for a set period of time. For example, if you buy a 20-year term life insurance policy, you’ll pay premiums for 20 years when the policy ends. If you die during this time, your beneficiaries receive a cash lump sum. However, if you survive the policy term, the policy expires, and you won’t receive any money for the premiums paid up to this point.
There is also joint life insurance, which provides cover for two people under a single policy. This is especially ideal if you and your partner share responsibility for your household’s finances. A joint policy can be purchased as an add-on to your whole or term life policy, or just as a standalone policy.
Once you take out life insurance cover, you are required to pay a monthly premium (sometimes annually) to your insurance provider. These payments must be kept up in order for you to remain covered.
2) How much cover do you need?
The amount of cover you need depends on how much you want to leave behind to your family when you die. Ultimately, this depends on your family’s financial situation, such as how much savings they have, or current debts, such as a mortgage.
Life insurance can support your family with future costs, such as:
- Living expenses
- Household bills
- Funeral costs
- Rent or mortgage payments
- Childcare costs
If you were to die, your family could struggle to cover the monthly costs of your household, in which case they’ll require a higher amount of cover. But if they have plenty of savings, or don’t depend on you financially, they’ll likely require less cover.
3) Consider your budget
You must also factor in your personal budget when choosing life insurance cover. Your premium cost will vary depending on your age, health and occupation.
For example, if you’re young and healthy, your premiums for cover will be cheaper than compared to someone who has been diagnosed with a medical condition. Furthermore, if you work in a high-risk industry, you could be required to pay more than someone working in a low-risk job.
The type of policy you choose will also affect the cost of your premiums. Whole life insurance tends to be more expensive than term life, as you are covered for the rest of your life, rather than a set period.
It’s important that you are able to pay your premiums throughout the cover term. If not, your insurer may choose to end your cover early, at which point, you won’t receive any money from the premiums paid into the policy.
4) When should you purchase life insurance?
You can choose to purchase life insurance at any age. But, for most people, life insurance premiums are cheapest when you are younger. As you get older, your health tends to decline, impacting your life expectancy. Therefore, the cost of insuring yourself increases over time.
That being said, you may not get married or have children until later in life. At this point, you may need life insurance. While you shouldn’t have any trouble taking out a policy, the odds are your premiums will be higher than if you bought the policy several years before.
Aside from age, there are other factors that can affect the cost of your premiums, such as:
- Health
- Medical history
- The policy type/term
- Occupation
- Cover amount
5) Get Quotes from Several Companies
If you’re not sure about the kind of life insurance cover you require, you might want to get quotes from several companies. This will give you a better idea of the different options available to you.
All you need to do is visit the websites of different insurers and compare their prices. Once you’ve found one company that offers competitive rates, make sure they have good reviews for peace of mind.
If you’re ready to buy life insurance cover, apply for a quote today and get your loved ones the protection they deserve!
