About Buying Life Insurance

It is important that spouses and parents consider buying life insurance for a number of good reasons. As the family often depends on the income that such persons may generate, life insurance comes to the family’s rescue in case of an unexpected death. Life insurance protection can be used for paying a mortgage, putting a child through college or in estate planning.

Figure Out How Much Coverage is Needed

To start, you will need to figure out how much money you would like to leave to your family at the time of your death. The total sum of money is called a death benefit. An easy way to figure out how much money you should leave is to determine your total annual salary and multiply it by 8. However, this is just a ballpark figure, as each person will have to decide what the individual needs of their family are. Once you’ve decided on the total amount of the death benefit, a life insurance agent or broker will present you with different policy choices.

Term Insurance

Term life insurance is the most cost-effective form of life insurance. It provides coverage during a specific period of time. In the case of premature death, term life insurance helps holders pay off mortgages and other debts. Many choose this as a good form of starter life insurance and later decide to convert it to a whole life insurance policy. The younger the insurance policy holder is when he takes out the policy, the less expensive his insurance rates will be.

Whole Life Insurance

Also known as permanent insurance, whole life insurance protects its holders throughout their life as long as the premiums are regularly paid. Unlike term life insurance, whole life insurance policies build cash value. This allows whole life insurance holders to take out policy loans. Some use these loans to fund their children’s education or obtain supplemental retirement income. However, these loans accrue interest and reduce the death benefit if they aren’t paid off. Each person should talk with a life insurance agent to decide what the right coverage is for her family.

Check with an Independent Broker

Instead of going with an insurance firm, more life insurance options may be available by consulting with an independent broker. Independent brokers have access to many life insurance products and plans, whereas an individual firm only has their individual company’s products to offer.

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