Nobody has to tell you why you should have life insurance: if you die and your family or someone who depends on you for support can no longer count on your income, life insurance will replace that income. In addition to deciding the amount of coverage, you will need to decide whether to purchase a life or term policy. Whole life (often called cash value or permanent life insurance) provides coverage for life and has an investment component that allows you to take out a loan against the policy. The downside: compared to long-term coverage, it is expensive, especially in the early years of politics.
Term life provides coverage for a period of time – typically five, 10 or 20 years – without the investment and loan of bells and whistles. Another advantage: term policies generally cost much less than their entire life. For most people, term insurance makes more sense and offers you maximum protection for your money. A trusted insurance agent may be able to make a convincing case for purchasing money. Value insurance To counter the argument that cash value insurance provides generous rewards after holding a policy for several years, advocates of the term urge consumers to buy a term and invest the difference in premiums. How much do you need? The rules of thumb – such as a purchase coverage of seven or ten times the annual pre-tax income – and the calculators provided by the insurance sector are a convenient starting point.
A more reliable approach is to add up the income your family would need to cover current expenses as long as they need it; the estimated cost of sending your children to college; your debts; and final expenses on death. So subtract savings, college funds and other life insurance policies. Finally, adjust the amount according to your situation. For example, you may want to increase coverage if a home parent provides childcare. According to the Insurance Information Institute, similar policies often have annual premiums that differ by hundreds of dollars per year. You can get quotes from multiple insurers by using websites like AccuQuote.com, LifeQuotes.com and Policygenius.com. How much you will pay for a policy depends on your age, gender, health and family history. Insurers generally ask for height, weight, blood pressure, cholesterol levels and any medical problems and often require a medical examination. Some will also affect your driving record, credit history and any risky hobbies. If an insurance company quotes a high rate because of your risk profile, look around. Some insurers pay much more than others for similar health conditions. You may already be getting life insurance as an advantage from your job and you may be able to purchase extra coverage through your employer without a medical exam. This could be a good deal if you have health problems, but if you are healthy you can usually buy a policy elsewhere for less.