5 Essential Factors to Consider When Buying Life Insurance

5 Essential Factors to Consider When Buying Life Insurance

There are many life insurance products in the market and choosing the right one can be a bit tricky. Insurance companies such as intelliquote, offer different types of life insurance and you should ensure that you buy the right type of policy. Life insurance was designed to leave a lump sum money behind when you die.

Whichever type of policy you choose, know that the basic purpose of life insurance is all the same. The following are some points that you should consider before you buy life insurance.

1. The purpose of Life insurance and the reasons for buying it

Generally, life insurance needs depends on your personal situation or your dependents. If you don’t have anybody depending on you, then there is no need of buying life insurance. Again, those people that can’t generate a significant percentage of their families’ income may not need life insurance.

Life insurance is ideal to people whose salaries cover their mortgage, support their family, and pay recurrent bills because life insurance will ensure that all these financial obligations are covered in the event of their death.

2. The amount of coverage you need

When it comes to the cost of life insurance, many factors can determine the amount of insurance, for example, the number of dependents you have, your other sources of income, your lifestyle, your debt, etc.

The rule of the thumb is that you buy insurance policy that is ten times your annual salary. You can also ask for assistance from a financial planner to help you determine which coverage is ideal for you.

3. Type of insurance policies

There are different types of policies available. They include whole life, term life, variable life, and universal life. The whole life policy offers both death benefit and cash value, but it is the most expensive of all. The policy is in effect until your death, even after you have paid all the premiums.

The variable life policy is a form of permanent life insurance, where you build up a cash reserve that you can invest in the choices that the insurance company offers. The value of your cash reserve is dependent on the way the investments are doing.

A universal life policy is also another form of permanent life insurance but you use part of your accumulated earnings to cover part of the premium costs. Term life policy offers death benefit but there is no cash value. This type of policy is recommended for people who are less than 40 years and don’t have any life-threatening illness.

4. The cost of the life insurance

Generally, the least expensive life insurance is generally a life insurance plan offered by your employer, if there is any. These policies are usually term policies, which means you are covered as long as you work for that company.

But the cost of the various types of life policies depends on factors such as how much you want to buy, the type of policy that you choose, and the amount of commission the insurance company pays the agent.

There are also underlying factors which will determine the cost of the insurance like the things that projects your life expectancy. High-risk people like those who smoke, who have hobbies or occupation which is dangerous, are overweight pay more for the insurance.

5. The Duration that you need

Before you buy life insurance, you have to consider the duration that you need it. For example, if you have just bought a home on a 30-year mortgage and want life insurance, you can have a 30 year term insurance policy. This will ensure that the mortgage balance is resolved after your passing. But you can also consider buying a permanent life insurance policy if want protection of more than 50 years.