Life Insurance – How Much and What Type Are Right for Your Family

Life insurance is designed to provide families with financial security in the event of the death of a spouse or parent. Life insurance protection can help pay off mortgages, help provide a college education, help to fund retirement, help provide charitable bequests, and, of course, help in estate planning.

In short, if others depend on your income for support, you should strongly consider life insurance.

If you’re a first time buyer of life insurance, or just need some information, never fear. Life insurance can be extremely complex to understand. Read on for the most essential information you need to know before you buy.

Coverage Amount

To determine the proper amount of life insurance, online calculators can be helpful. You can also get a ballpark figure using any number of formulas. The easiest way is to simply take your annual salary and multiply by 8.

Remember that calculators only allow you to perform hypotheticals, and shouldn’t be taken as a final answer. Use online tools you trust to get a better understanding of what you might need out of a life insurance policy, but be sure to speak with an agent in person.

Term vs Cash Value Life Insurance

The two main types of life insurance are pretty different, so you’ll probably want to spend some time studying them before choosing one over the other.

Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. Cash value life insurance may be one of several types: whole life, universal life and variable life. Your choice should be based on your needs now and in the future and what you can afford.

Length of Term

Not everyone needs life insurance. If you are young and without dependents, you may not need life insurance. If you plan on having dependents, it can be a good idea to buy insurance when you are young.

Both kinds of insurance have variable policy terms. Term insurance covers you for a set time period. At the end, you will no longer have insurance. Cash value life insurance can be permanent.

What Company Should You Choose?

Companies look at a whole host of information and utilize a variety of methods to vet who they will insure. Shop around for the best life insurance policy you can find and don’t be dissuaded when one provider turns you down. Try to find the best balance between coverage and monthly rate.

You want to make sure you choose a company you can rely on to be around for as long as you’ll need your coverage and one that invests premiums in a highly prudent manner in order to pay the claims of its policyholders.