The first time most people think about life insurance is when they experience a major life event like getting married, buying a house, or having a baby. This is for a good reason—these life events are a sign that your financial commitments are increasing. If you’re considering your first life insurance policy use these five tips to help you find the right plan:
1: Decide whether you need life insurance
If you’re wondering whether you really need life insurance then ask yourself this question: would your family be financially secure without your income? Life insurance is a financial umbrella that protects your family if you’re not around to protect them. Think about all of the expenses that your income covers such as mortgage payments, childcare, food costs, college tuition, and utility bills. Life insurance can provide a payment that will cover these expenses until your family can provide for themselves.
2: Calculate how much coverage you need
Calculating your coverage needs is the first step to finding the right plan. The main thing to consider when deciding how much coverage you need is what you want to leave money for. Work through your current expenses to identify what costs you’d want to cover with a life insurance pay out. If you have a mortgage this is probably the first thing you’d want to provide for. Paying off a mortgage will give your family a home for as long as they need it. If you have young children you might also want to think about childcare costs and leaving money to pay for their college education. Perhaps you have large debts that you’d like to cover or just want to give your family a financial buffer to fall back on. Making a list of items that you’d like to provide for can help you get an idea of the life insurance coverage you need. We’ve created a life insurance calculator that will help you work through your current and future expenses to establish what size policy will best fit you and your families needs.
3. Understand the difference between term and permanent life plans
There are many types of life insurance policies available but they generally fall into two main categories: term life insurance and permanent life insurance. Term life policies provide coverage at a guaranteed premium for a set period of time known as a term. Common term lengths are 5, 10, 15, 20, and 25 years. These policies are great for people who know they only need to provide coverage for a specific period of time.
Permanent life insurance policies, like universal life, provide protection for life as long as the policyholder continues to pay the premiums. This means that the policy provides a guaranteed pay out, unlike term policies that only provide a payment if the policyholder passes away during the policy term.
4. Determine which type of plan best fits your needs
Deciding which policy is right for your family can be a difficult choice. Budget conscious buyers may want to consider a term plan as premiums may be more affordable. Whereas permanent policies are expected to have to make a payment since the policy lasts through your lifetime and the policy builds a cash value unlike term policies, which means these policies are more expensive to cover these costs.
5. Talk to an expert
Choosing which type of plan offers the best coverage for you and your family can feel overwhelming. IntelliQuote can help advise you on choosing a plan and provide you with free quotes for both term and permanent plans. Apply for a quote online or call our team of experienced licensed agents today.