Purchasing life insurance for the first time can be overwhelming. You’ll run into a lot of unfamiliar terms you may not understand at first. Here are a few tips that can help you create an organized approach towards researching life insurance so that you can find the policy that fits your needs best without any unnecessary hassle.
Choosing the policy type
There are two basic types of life insurance policies: term life and whole life. Term Life insurance policies last for a specific period of time, and are much less expensive than whole life insurance. This is because it usually expired before benefits are used.
Whole life insurance doesn’t expire; it lasts from the day you purchase the policy until the day you die, no matter what. The reason that whole life is so much more expensive than term life, is that it can last anywhere from a few years to a few decades.
Understand why you need life insurance
Life insurance is a serious investment, and shouldn’t be made lightly. Avoid purchasing a policy because you’ve been told that you should, because although you’ll see ads claiming that everyone should have life insurance, the truth is that it’s not for everyone.
The purpose of life insurance is to provide financial support for your dependants in the event that you’re no longer around to do so. But if you don’t have any dependants, there’s a chance you don’t need to spend your money on this. If you’re significantly contributing to or fully supporting someone else, you may want to think about purchasing a life insurance policy in the case that when you pass, they wouldn’t be able to maintain the lifestyle that you provide them.
How much to buy
They key to determining how much life insurance you need to purchase is understanding the needs of your beneficiaries. There aren’t any set guidelines on how much you should be purchasing, as it varies from person to person.
Your decision will be based solely on how much money your dependants need and for how long. Calculate the needs of each dependant annually, multiply that by the number of years they’d need support and that should give you a rough estimate of how much insurance you need to buy.