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Step 1
Determine your approach - Many people subscribe to the income replacement approach to determining your life insurance needs. When using this approach, multiple your current income by 10. This is the amount of insurance that your family needs to continue living with the same standard of living. Other people simply determine how much income they would need to pay off all of their debt, including funeral costs. It is up to you to determine which strategy you best fits your personality.
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Step 2
Determine the type of insurance you need - It seems like a new type of insurance is being developed on a daily basis. Many financial advisers suggest either term life insurance or whole life insurance. Term Life is the most basic form of life insurance. This kind of policy is written for a specific period of time, usually from 5 to 10 years. Each time the policy expires, the premiums can become more expensive. A benefit is only paid upon death. Whole life insurance is a policy with a savings component attached. Typically, if you continue to pay your premiums you can lock in the premiums that you pay. Benefits are paid at the end of the term, even if no death has occurred. Since whole life insurance policies are guaranteed to pay something to the insured at the end of the policy, the premiums are significantly higher than those for term life insurance.
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Step 3
Contact a qualified adviser - Since determining your life insurance needs is such an important decision, you should contact your local certified adviser. This advisers can offer you a non-biased opinion based upon your specific situation. At the very least, you should obtain a quote for life insurance online before making a purchase.
Comments
Elizabethknows said
on 12/16/2008 I never really understood what I needed in terms of life insurance this exlplains it in lamens terms, thanks
taskeinc said
on 12/9/2008 Thanks for explaining term life vs. whole life insurance .. B