Are you in the market for life insurance? Covering your family against the unexpected is one of the kindest and most loving things you can do.
However, it’s challenging to navigate the waters of choosing the right options. If you don’t have a background in finance, you might find many of the terms puzzling. Don’t let yourself become so overwhelmed that you give up — let these seven tips be your guide to finding the perfect life insurance policy for you and your family.
1. You Have Several Options
When it comes to life insurance, there are different types. Below is an overview of the three most frequently seen policy varieties:
- Term: This type of insurance policy covers you for a set number of years, typically 20. You do not accumulate cash value. At the end of the coverage period, your protection ends.
- Whole: In this type of life insurance policy, you have coverage for life. Although it costs more, buying it young allows you to lock in a set rate that offers substantial protection as you age. Plus, these versions accumulate a cash value that you can borrow against.
- Final expense: While not life insurance per se, this policy type does offer your family protection from having to come up with funeral costs out-of-pocket while they grieve. It is less expensive than other policy types and may come in handy for those with medical conditions that make qualifying problematic.
2. You Can Find Affordable Coverage
You might think that you can’t squeeze one more thing into your budget. However, you might assume misinformation about how pricey coverage is. One LIMRA study found that consumers typically assume that life insurance is three times more expensive than it is in reality.
You probably saw those term life advertisements on television that boast prices around $20 per month for substantial coverage. These figures aren’t exaggerations. Start shopping around — the peace of mind will help you sleep more soundly.
3. You Can Work Around Medical Conditions
Life insurance quotes come in preferred and standard rates depending on your health condition. Please don’t assume you can never get coverage if you are obese, smoke or have diabetes.
Some insurers offer tailored life insurance products for people with specific health conditions. For example, Prudential provides plans for HIV-positive individuals on a case-by-case basis.
Another option is to look into guaranteed-issue insurance that doesn’t require a health exam. You will pay much more for less coverage, but it’s better than going without any protection.
4. You can Lock in Rates Against Future Ones
If you have the means, locking in whole life insurance rates young is the ultimate gift you can give to your family. Your rates never increase — meaning if you later get diagnosed with a health condition, you keep your coverage as long as you keep paying your premiums.
Another option to consider if you are young and poor is to purchase a term policy that has a conversion option before the end of the coverage period. You might not have to take a separate health exam if you exercise your rights within the specified time frame.
5. You Can Protect More Than Your Spouse and Kids
When you buy life insurance, you probably think of protecting your spouse and children. However, they aren’t the only people in your life you should cover.
If you are a single parent, you might want to list the folks who will look after your children if you die as primary beneficiaries. Otherwise, the state holds the fund until the child turns 18, and your surviving relatives have to petition the court to get money for their care.
6. You Can Save for Your Child’s School
If you invest in a whole life policy, you can borrow against the principal at much lower interest rates than those offered by other lenders. What does this fact mean for your child’s education?
If you want to help them out, you can borrow against your policy to pay for college costs. You can let them pay you back at the same low rates you enjoy instead of paying steeper interest.
7. You Can Backup Your Emergency Fund
Most financial experts recommend having three to six months worth of basic living expenses in a liquid savings account. You should still maintain your emergency fund, especially in uncertain economic times.
However, if you have a whole life policy, you have a secondary backup fund if things go south — badly. Few financial advice columnists tackle what you should do when you need to use your emergency fund. An investment like life insurance that you can borrow against can become a lifesaver. Things happen, like getting ill and losing your job and your health insurance coverage at the same time medical bills keep accumulating.
Use These 7 Tips to Find the Perfect Life Insurance Policy for You and Your Family
You owe it to your family to find the perfect life insurance policy. The above guide can help.