A Basic Guide to Choosing a Life Insurance Plan – Money Choice

Last Update – 19 Jan 2019

Life insurance is a policy, or contract, between you, the policy holder, and an insurance company (insurer). In exchange for your payments, commonly called premiums, the insurer provides death benefits to your beneficiary after your death. Typically, the death benefit is a lump sum payment that covers expenses such as your funeral and other bills. However, you can also receive a portion of the benefits while you’re alive. This depends on the type of policy you have and what events trigger the insurance payments like a critical illness.

The goal of life insurance is to give the policy holder peace of mind. For example, you know that when you die your family will have financial security. Although many policy terms and options are the same for many individuals, each specific life insurance rates depend on the applicant. For example, if you are young, in good health and of a certain gender, your premiums may be cheaper than another person’s premiums. Generally, insurance companies use statistics to determine your monthly rates. The statistics include age, gender and a healthy lifestyle. Thus, women usually have cheaper premiums than men because they live longer. So, you have to shop around to receive the best life insurance quotes.

Types of life insurance

All life insurance policies are not the same. Some of the policies build up cash value and others are only for a short time. Life insurance companies offer two basic policies: term life insurance and cash value life insurance. Term life insurance rates start out low. Cash value insurance rates start out higher at the start of your policy. However, building cash value in your insurance policy does come with advantages. You can:

• Borrow against the policy (take out a loan). You can repay the amount. If you don’t, the loan will be deducted from the benefits.
• Use the cash value to buy more insurance
• Increase your retirement income (with the additional cash value)

Within the two basic types of life insurance are different policy options.

Term Life Insurance

Term life insurance is for a limited time such as 10, 15 or 20 years. The premiums are guaranteed for that time. After that the temporary insurance ends or may continue. If it continues, you may have a higher rate.

Universal life insurance

Permanent insurance is flexible and allows you to lower or increase your coverage and/ or premium over time.

Whole Life Insurance

Whole life insurance is permanent insurance and provides lifetime coverage. The premiums are fixed and builds cash value. The value functions as a savings account that maybe tax-deferred.

Find Best Life Insurance Plan

Finding the best life insurance isn’t based on cheap life insurance, but your needs and much money your family needs. For example, if you are in your 50s, you may only need insurance for a short amount of time. A universal life plan may fit your needs if you want cover your death benefits and build cash value for any financial problems while you’re alive.

You may need lifetime coverage with tax-deferred savings. So, if you are interested in estate planning option to help you transfer your wealth to your beneficiaries, then you may want whole life insurance.

Once you determine your needs, consider the cost of life insurance based on certain factors. Insurers look at risk and rate classes to determine your premiums. For instance, if you’re in good health with a low-risk lifestyle, you’re in the standard class. The rate class depends on various factors like:

• Family medical history
• Tobacco use
• Cholesterol risks

Now you’re ready to acquire some life insurance quotes. You can buy life insurance online or through an agent. Some online life insurance companies have a life insurance calculator to help you figure out the premium you may pay. You want to get a number of quotes based on your needs and the type of insurance you want.

Compare life insurance quotes

You may think life insurance comparison is challenging, but it’s not because half of your work is already done. Place your online insurance quote next to any other quotes you have. You want to pick the most affordable life insurance, but consider these questions during your comparison.

– Do your benefits and/ or premium vary each year?

– How much cash value can you accumulate in the policy?

– What part of the benefits or premiums of your policy is not guaranteed?

– Are policy fees built into your premiums?

– If you’re thinking about a term policy, is it convertible to a whole life policy regardless of your health?

– Does the policy have dividends (the cash value portion)?

If you’re comparing the new quotes and your current policy, you want to answer some additional questions such as:

– Does the level of benefits decrease or increase?

– Does the new quotes match your insurance needs better than the old policy?

How to find an affordable life insurance policy?

Use the quotes as your guide when trying to find an affordable life insurance policy. First, make sure you can handle the premium payments. For instance, initial premiums may start out high, but decrease as the policy grows. If you lose your job, can you still afford the high payments?

Another way to find the most affordable policy is using honesty and common sense. Whether you’re buying insurance online or not, you need to tell the agent about things that insurance companies penalize applicants for such as being overweight, family history of medical problems and tobacco use. If you have a low quote then go through the underwriting process, the insurer will discover those potential problems. This can skyrocket your low quote into a high premium.

The lowest, most affordable policy is often offered when you’re young. However, you can find a low cost life insurance policy regardless of your age. Talk to an agent, pick a policy based on your needs and income and be honest.

Important factors to Consider while choosing a life insurance plan?

There are many important factors regarding choosing a life insurance plan like finding one that fits your needs. Remember, before buying any policy whether it’s a senior life insurance or not, review your life insurance needs and who depends on you.

• Are you providing for your spouse, children or parent after your death?
• Do you have a retirement plan already like investment accounts or real estate?
• Are you looking for insurance for the next 20 years or your entire life?
• Do you want disability rider in your policy to take care of you before your death?

Don’t pick a policy you can’t afford. You’re not trying to bump your beneficiary into the top tax bracket. You’re trying to cover your funeral expenses, bills and help them sustain your loss of income.

Pick the type insurance policy that fits your insurance needs. If you want one that has cash value built in, don’t pick a term life insurance policy. If you want a plan for a short time, choose a term policy. Be sure you can afford the policy premiums. Regardless of what type of policy you choose, take the time to cost compare.

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