A life insurance policy is one of the few things you pay for that you hope you never have to use. It’s vital to make sure you have a life insurance policy that will protect your family in the event of a tragedy. Use these tips to help you choose a life insurance policy that meets your needs.
Decide on the Term Length
Term length is one of the most important aspects of life insurance. And one of the most important variables in deciding a term length is age.
- If you’re a young adult, policy premiums will be far cheaper than an older adult. Therefore, it might make sense to lock in a long-term rate, as you never know what prices will be when you reach an older age.
- If you’re an older adult, you should already have a hefty retirement fund plotted out for you. While life insurance coverage is definitely essential, as your retirement funds won’t instantly be available, you might not need as much as a younger person.
Other factors to consider when determining your term length include:
- Whether or not you have children that might need caring for after you pass (meaning you might want to choose a term length that covers you until they reach adulthood).
- Whether or not you have a mortgage, as your loved ones could be responsible for paying it off if you suffer an untimely death.
- Whether or not you have aging parents to care for, as you’ll need to make sure they’re financially comfortable if you aren’t around.
Decide on the Coverage Amount
The next important thing to consider is the amount. Unfortunately, there’s no simple formula that can help you magically calculate an exact coverage amount. Rather, you’ll need to take a close look at your financial situation and make that decision based on your individual needs. Some factors to consider include:
- Money to cover your children’s childcare and college education
- Money to help your elderly parents
- Money to pay off your credit card debt, student loans, or mortgage
- Money to help your family pay for your funeral costs
- Money to help your partner or spouse get back on their feet, especially if you’re the sole breadwinner
While there are other factors that go into choosing a life insurance policy, these are by far the two biggest factors to consider. If you take a careful inspection of your life and responsibilities, you should be able to find the insurance product that meets your needs.
Cohen, Aubrey. “How Long Your Term Life Insurance Should Last.” NerdWallet. 15 July 2015: https://www.nerdwallet.com/blog/insurance/how-long-term-life-insurance-policy-should-last/.
Wang, Penelope. “How to Choose the Right Amount of Life Insurance.” Consumer Reports. 30 March 2018: https://www.consumerreports.org/life-insurance/how-to-choose-the-right-amount-of-life-insurance/.