If you have any financial responsibilities or a family, you should consider taking out a life insurance policy. In the event of your untimely demise, a life insurance policy can give your loved ones financial security. While life insurance policies may seem straightforward, it can still be challenging to find one that suits your needs. When buying life insurance, here are three things that you need to keep in mind when shopping for a policy.
Term Versus Whole Life Insurance
The first thing that you need to consider when it comes to life insurance is what type of policy will work best for your needs. There are two types of life insurance to choose from, term life insurance and whole life insurance. With a term life insurance policy, the benefits are paid if you die during the term set by the policy. The period for a term life insurance policy can range from as little as one year to 30 years. With a whole life insurance policy, as long as you keep up with your premiums, the benefits are paid whenever you die, no matter what age.
What Determines Rates
Another thing to consider when purchasing a life insurance policy is what factors will impact your rates. Life expectancy is the most significant factor at play when it comes to determining premiums. Things like your current age, gender, and overall health are used to estimate your life expectancy. Those who are younger and healthy will have cheaper rates. If you are a smoker, you will have higher life insurance premiums than a non-smoker of the same age and gender.
How Much Coverage You Need
While most of us don't want to think about our deaths, it's essential to carefully consider what your loved ones will need if you meet your end sooner than expected. Knowing how much coverage you need can be tricky. You will want to consider your mortgage, college expenses for your children, and other future expenses that you may not be there to pay for. A good rule of thumb is to purchase a policy that offers somewhere between five and ten times your current annual income.
There are plenty of reasons why you should consider a life insurance policy. There are also a few things to know. First, there are different kinds of life insurance. You'll want to determine whether a term or a whole life policy works best for your needs. Next, you'll need to consider what determines your rates. Age, gender, and health will impact how much you pay. Finally, make sure that you have enough coverage for any future needs.