Getting a life insurance policy may be the best decision that you make for your family. If you are the sole breadwinner in the family, getting your life insured is easily the most important step that you could take. In this day and age, money is everything. Buying a life insurance policy is considered an essential part of financial planning.
As you grow older, start your own business and a family, you will begin to realize the importance of getting a life insurance plan. Not only will you be comfortable in knowing that your loved ones will have a sound financial cushion in case you pass away, but you will also be able to live your life free of worries.
Before we talk about the different types of insurance products, it is important to understand the reasons why you should apply for, and compare life insurance products. Here are a few major reasons:
To Protect Your Family
This is a no-brainer. If your family depends on you for financial sustenance, insuring your life will go a long way in protecting your family. Essentially, the insurance policy will replace your income in the event of your passing. If your children are growing up, the insurance policy will help them meet their needs. There are many cases in which parents passed away at an early age, and their insurance policies were enough to cover college expenses for their children later on. A key part of planning your family’s finances is to think about the future. Instead of buying any policy, always compare life insurance products carefully.
A Sound Financial Cushion
Not everybody leaves behind millions of dollars as an inheritance for their loved ones. If you have been unable to accumulate enough assets to pass off to your children, leaving behind a life insurance policy is the next best thing. You can name your children as beneficiaries of the policy, thus protecting the future of your children and giving them a healthy amount of funds in order to cover their needs in your absence. When you start to compare life insurance products, look at the overall amount you will get. Will it be enough?
Peace of Mind
People start worrying about their children’s future by the time they turn forty. However, you should start thinking about it as early as you can. Needless to say, money cannot replace a person. However, everybody will die someday. When thinking about financial decisions, you don’t need to get emotional. Instead, you need to focus on what is best for you and your family. Getting life insurance will give you and your family complete peace of mind.
These policies are certain, so you don’t have to worry about who will care for your family in the event of your passing. None of us has a clue about when we shall die, which is why it is imperative that you make an informed decision while you are still able.
As you start to compare life insurance products, you will realize that some products are slightly different. Some might charge a lower premium, while others may provide additional benefits and discounts. Many people often use online tools and products in order to properly compare life insurance products.
To Pay Off Outstanding Expenses or Debts
In the event of your passing, your family might be caught up in serious financial turmoil. Your family’s troubles will be compounded even further if you have debts or other outstanding expenses that need to be cleared. More than half of the American population has some sort of debt. Whether it’s a car loan, a mortgage, or a repayment on your credit card, the money you receive from your life insurance can be used to repay all of your family’s outstanding debts.
When you begin to compare life insurance products, do keep your debts in mind. Do you expect to take on more debt? What about the interest rates? Obviously, the insurance company will not help you determine all of this. That is why you must compare life insurance products and consider the annual premium on your own
How Much Insurance Do You Need?
Most people don’t have a clue about the extent of life insurance coverage that they require. Unfortunately, there’s really no definite answer to this question. Unique factors and different circumstances exist for almost every family, thus making it difficult for you to use a pre-set formula to calculate the amount of coverage you need. This is why it is so important to compare life insurance products. A policy that’s good for a friend might not be viable for you.
Because of this, using rules of thumb isn’t such a good idea. For instance, many experts suggest that people who have a young family should opt for a life insurance policy that covers five to ten times their annual income. While this may seem to be a good idea, you will need to analyze the policy further. To compare life insurance policies in detail, you can also sign up for an online service.
Several factors play a part here. For instance, the policy you purchase should be designed to fulfill a purpose. Should the insurance policy cover the future costs (adjusted) of your children’s university fees? Is your partner currently working, or will he or she continue to work in the future? What is the total amount of debt currently owed by your family?
These are just some of the factors that you must consider when you begin to compare life insurance products. Now, while rules of thumb might not be applicable under ordinary circumstances, almost all life insurance policies are designed to cover one of the following financial needs:
- Replacing your income
- Repaying existing debts
- Providing finances for your children
- Covering costs of education
- Adequate funds for any other dependents
You need to decide what you need the policy for. Don’t try to be greedy and get a policy that caters to all of these categories. The insurance premium will be calculated based upon the size of the insurance policy. If the insurance premium is too high, it might end up doing more harm to your family’s financial position than good.
Once you decide why you need the policy, the next step is to start hunting. Look through different policy providers and select the one that offers the lowest possible insurance premium. You might get a discount if you buy other insurance products from the same company too.