How to Decide What Type of Life Insurance to Buy

There are a number of different types of life insurance products on the market today. It can be a tough decision trying to sort out which life insurance policy is best for you and your family. Hopefully by following these simple steps you can begin to make the right financial decision when picking out your life insurance policy.

There are two main types of life insurance policies. Whole life and Term life.

Term life insurance is pretty straight forward. If you die during the term of the policy, the insurance company pays the policy limits. There are many different term lengths to choose from. Life insurance terms are commonly in five year increments.

Whole life insurance is good for your whole life. It cost much more than the term policy as the insurance company is certain that it will have to pay a death benefit. They must allow for enough accumulation of funds to cover the benefit and any expenses that are needed to service the policy. There is a huge benefit to the consumer. Once you buy a whole life policy, you do not have to get a medical exam to qualify again. With a term policy you must get a new medical exam when taking out a new policy.

Another benefit to whole life is the cash value of the policy. You have a guaranteed amount of money that you can receive in the future if you decide to surrender the policy. The amount of money is the difference between the amount at risk for the insurer and the funds that have been built up on the policy.

Difficulty: Moderately Challenging

Instructions

1. Determine how much coverage your family will need if you die. This is a difficult thing to think about as our own morbidity is the last thing we want to consider. What will your family need to maintain your current standard of living. Write down everything that you can think of needing money for in the next 20 years.

2. There are many places on the web to shop for life insurance. Shop around to find the best rates for the policy that meets your needs.

3. A combination of term and whole life insurance policies are available to meet the needs of most people. You may be needing a simple burial policy or enough funds to allow for the continuation of your business. The main thing isn't the size of the death benefit but whether or not it will cover the expenses that you need to have covered in the event of your death.

Tips & Warnings

• Your medical records will likely be review by the insurance company along with your blood work.
• Rates are higher for smokers and those with other health conditions as this is more risk for the insurance company.

Resources

• State Farm
• Insure.com