It’s never fun to contemplate your own mortality, but consider the facts: Life insurance can offer peace of mind for you and financial security for your family after your death. The right policy can cover funeral costs, medical bills, mortgage payments, and more, easing burdens during an inevitably trying time. Here’s how to find what’s best for you.
Team up to find the right level of coverage Common shortcut formulas can be tempting—some websites suggest buying a policy that will pay the equivalent of four years’ salary—but they might not suit your situation. Choosing the right level of coverage depends on where you are in life: your age and marital status, the value of your assets, and whether you have kids, among other considerations. Also, don’t rely solely on coverage offered by your employer; many group policies won’t offer your family sufficient protection. A better move: Discuss your situation thoroughly with an agent before you buy.
Decide between the types of policies Many life insurance policies fall into two categories: term life and permanent life. Term life insurance covers you for a specified number of years, or up to a milestone like your 65th birthday. Because it’s designed to provide income replacement without any sort of investment benefit, it’s usually the least expensive option. In contrast, permanent life covers you across your entire life span and builds cash value over time, which you can borrow against to help pay for college, retirement, and other specific needs. Permanent life policies themselves come in two varieties: Universal life lets you increase or decrease your premiums and coverage as your financial circumstances change; whole life offers premiums that won’t rise as you age but gives you less flexibility than universal.
Zero in on your premium How old are you? How healthy are you? Do you have dangerous hobbies? How much money will your survivors need after your death? These and other factors, such as your profession and your family medical history, are part of the complex equation that determines your premium. An agent who specializes in life insurance can guide you through the details.
This article was first published in September 2013. Some facts may have aged gracelessly. Please call ahead to verify information.