Life is good. You have a stable job, a home, and a growing family. You are managing your finances well and using credit properly. You only have one more thing to take care of – a life insurance policy so that your family is covered in the event of your death.
Nobody enjoys thinking about their own death, but it's important to set up proper protection for those you leave behind. Your family will have enough issues to deal with, and financial hardship should not be among them.
Most likely, you have never given life insurance a thought until now. We offer six tips to help you on your way to proper coverage.
1. Understand the Basic Policies – Insurance policies are classified as either term or permanent life policies. To decide which is right for you, it's important to understand how they differ.
Term life policies provide basic insurance for a set amount of time such as twenty or thirty years. If you die during that period, your family receives the death benefits. If you outlive the term, the policy simply expires and you decide on a replacement or choose to go without.
Permanent life policies are designed to last for your entire life. You pay higher premiums, but those premiums are divided into a death benefit and an investment component (known as cash-value).
2. Outline Your Life Insurance Goals – Whether you choose permanent or term life insurance, you are projecting far into the future. Think about where you expect to be in 20-30 years, and what will be important to you then. For example, over the long term, would you prefer to pay lower term-life premiums and invest your money elsewhere such as college funds or 401(k) programs, or is the investment component attractive to you?
3. Determine Your Coverage Needs – How much money will your family need if you die? Online calculators are available to help you decide, but remember that you are covering a long timeframe. You may have mortgage payments, college funds, and other long-term expenses that haven't entered the picture yet – and your income will likely change over time as well. With online calculators, you can run different scenarios and find the option that suits your balance of premium costs versus coverage.
4. Choose a Reputable Insurer – If there's one thing that's important in an insurance company, it's that the company outlives you. Look at the financial stability of the insurer as well as customer service ratings. There are plenty of helpful online insurance ratings and reviews to help you decide.
5. Seek Professional Assistance – You can choose an independent agent or financial advisor to help you evaluate different insurers, or you can find a suitable agent with a single chosen insurer. Either way, find an agent with whom you are comfortable and who can explain insurance coverage in layman's terms.
The agent should be able to tailor policies to your situation and explain any policy riders (essentially add-ons to your coverage) that may be relevant to your needs, and do so without being pushy.
6. Use the "Free Look" Period – Insurance policies have a "free look" period that allows you to review your policy, clarify any confusing issues, and change or cancel the policy within that period. Be sure to verify the length of the free look period with your chosen insurer.
With a little thought and research, you can find the right policy for your needs. Put your policy in place, and you can focus on the more important task of living and enjoying your life instead of worrying about what happens to your loved ones at the end of it.
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