How to Choose a Life Insurance Policy


For many people, especially those with families, having life insurance is an important part of their financial planning process. Along with providing peace of mind, life insurance will ensure loved ones or other beneficiaries will have the money needed to maintain a standard of living or pursue other options upon the death of a loved one. However, since there are many types of life insurance, it can be confusing trying to decide which would best suit your needs. If you are preparing to choose a life insurance policy, here are some helpful tips to consider.

Do You Need Life Insurance?

Before selecting a life insurance policy, it is important to decide if you need life insurance at all. If you have a family, especially young children, it may be a good idea to have life insurance in place to protect them financially. However, if you have no family who is relying on your financial support, life insurance may not be necessary. Yet even it you have no family, many people have life insurance policies where they select a favorite charity, group, school, or other organization as the beneficiary, so keep this in mind.

How Much Coverage?

Once you have decided you need life insurance for your family or other beneficiaries, the next step will be deciding how much coverage you will need. In most cases, insurance experts recommend you select an amount of coverage equal to 5-10 times your annual salary. By doing so, this will allow family members not only a sizable amount of money to live on, but also enough money to pay various debts and other expenses. If for any reason you feel as though you may need in excess of 10 times your annual salary, it is usually best to discuss your needs with a financial planner or estate planning attorney.

What Type of Policy?

After deciding how much coverage you will need to have with your life insurance, you should give very careful consideration as to the type of life insurance policy you purchase. For many people, especially those who are younger and in good health, term life insurance is a popular option. Offering potentially large death benefits but no cash value, term policies are very affordable and can be spread out for generally up to 20 years. For other individuals who may be older, in poor health, or who may not need large amounts of coverage, whole life insurance policies are a good option. Offering guaranteed acceptance with no medical questions or exams, these policies build cash value over the years. However, they are much more expensive than term insurance, so it may be best to consult a financial planner before making this decision.

Work with an Independent Agent

If you want to know the various selections of life insurance that are available to you, it is usually a good idea to work closely with an independent insurance agent. By doing so, you can not only review policies from many different types of companies, but also have an agent working with you who has no particular stake in whatever policy you choose. Since an independent agent will represent several companies, they will simply be able to act in an objective manner, and can carefully explain all details of whatever policies in which you may be interested.

Don’t Put It Off

Once you decide you need a life insurance policy, don’t procrastinate about making your selection. If you do, you may find yourself paying more for coverage. Since insurance rates are based on age, physical health, and other related factors, it is always best to purchase life insurance when you are young and healthy. Since premium rates are often locked in for the life of the policy upon your purchase, buying when you are young can save thousands of dollars over the life of the policy.

If you keep these tips in mind when choosing a life insurance policy, it is almost guaranteed you will make the best decision for yourself and your family. Whether you choose a term life insurance policy or feel a whole life guaranteed acceptance policy will work best for you, there is no doubt you will have peace of mind.


About Author

Kelly is DailyU’s lead blogger. She writes on a variety of topics and does not limit her creativity. Her passion in life is to write informative articles to help people in various life stages.

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