Life insurance is a bit like clothing in the sense that it is an essential part of responsible living. In addition, you can choose from a variety of options close to virtually unlimited, and these options can come at a variety of costs. From finding bargain boxes at gourmet stores to custom garments sewn from the finest rare fabrics.
But a tailored cashmere jacket (we assume) adorned with precious diamonds and Fabergé egg yolks is unlikely to require the most expensive life insurance you deserve (and the higher premiums that will accompany it), just as no one needs it. And just as a neat store cardigan can have a few holes drilled in it, buying a cheap policy may save you money, but you may get less coverage than you need most.
So, how do you find the right policy to meet your financial needs? And how can I get the cheapest rates? I’m so glad you asked me. We’ll give you tips on how to find affordable life insurance.
Determine the type of life insurance plan you need
Like anything else you can buy in a store, the first step is to narrow down the range and look at what your options are. First, let’s define life insurance. In short, when an insured person dies, the customer usually pays a monthly regular premium and receives financial compensation instead. This money, in turn, can help offset many expenses, from funeral expenses for children left behind by the deceased to college tuition.
The big picture is that customers pay premiums to life insurance companies. The life insurance companies pay for death insurance out of that money (and cover the administrative costs of life insurance). Insurers use actuarial tables to determine the probability of a client’s death after a certain period of time based on factors including the client’s health status. All of this helps ensure that the fund has the money to cover the client’s death insurance.
So why should I take out life insurance? Because, as we all know, sometimes the unexpected happens. And if something happens to you, life insurance helps your loved ones pay for whatever you leave behind. This includes immediate, one-time needs, such as funeral expenses. It also includes long-term and ongoing needs, such as compensation for loss of income. If you have unpaid debts, from student loans to mortgages, beneficiaries can use the money to pay them off. When you sign up for life insurance, you’ll never need to use it. But if the worst happens, you’ll be glad you did.
So, who needs life insurance, and when should we think about it? A few examples:
- You’re a new parent (or planning to build a house).
- You use your income to pay your family’s bills.
- You are interested in leaving a financial inheritance.
- You and your partner or spouse share financial obligations, such as loans.
Life Insurance Period
Term life insurance is a type of life insurance that has a term, as its name implies. Generally, you take out a policy that guarantees a certain period of time (typical periods are 10 years, 15 years, 20 years and 30 years). If anything happens to you during that period, the beneficiary gets death insurance. Yes, that’s why many people choose the appropriate period at the end of the semester and when the costs decrease (for example, after their child graduates from college). If you live past that deadline, you won’t be able to receive payments. But you’re still alive, and that will give you some comfort. (At least, that’s what we hope.)
One of the main advantages of life insurance is that the premium is usually fixed over the whole period, which is called the premium for the level of coverage. In other words, the premium you pay in the first month will be equal to the premium you pay in the last month of your term (and every month in between). (This is why many experts advise taking out life insurance when you’re young and healthy. That’s because you can lower your insurance rate over the course of your term. Find out more about it after a while.) This consistency will help you budget for the future, and it also means you never have to worry about it again, as long as you keep paying for it when you take the time to take out insurance. Peace of mind for a few decades? Priceless.
To summarize all of the above, term life insurance is one of the cheapest types of insurance. That’s why it’s the most popular. Especially if you can afford it with a limited budget.
Permanent life insurance, also known as life insurance or universal life insurance, is exactly what permanent life insurance is called. This policy will last a lifetime. Life insurance usually has a cash value that can increase or decrease over time, so it’s best to work with a financial professional when you’re worried about whether this insurance is right for you. The rate is 5 to 20 times higher than term life insurance (as opposed to term insurance) because it preserves the life term and builds the cash value.
How much life insurance is needed and how much it can cost
Those of you who have read to this point probably think life insurance is a good idea. Perhaps you think the term “life insurance” is right for you. Good! But the next question is: How much do I need for insurance? Well, here you are.
The law of experience for determining the need for life insurance
The reality is that what one person can afford can be expensive for another, or vice versa. Thus, there are quick experience rules that most people use to determine how much insurance they will get. Take your annual income. Multiply it by 5 or 10. Here’s a good starting point for understanding how much life insurance is needed.
Why this particular number? Think about it. If something happens to you, your annual income will be $0. But your annual expenses may remain. Think about the outstanding debt you have. And the expenses for loved ones – children, spouses or couples, and even elderly parents who rely on you financially – will continue. Life insurance is a way to soften that blow by creating a source of income (usually a lump sum, usually tax-free) to help families deal with the economic blow of lost wages. (It will also reduce one thing they worry about during an already stressful period of mourning.)
Let’s be clear: you have to run the numbers before you do this envelope calculation. And there is such a thing as too many safeguards. (You didn’t know you were going to hear this from a life insurance company, did you?) But if you are responsible for your family’s livelihood, you may need extra insurance. If you are a stay-at-home parent, you may need less. (While you may still need some money, you may not get a paycheck, but you may still be contributing to your family, and you may need some form of paid child care in your absence.) But the basic idea is to roughly specify what area is needed. At Haven Life, you can buy insurance for $100,000 or up to $3 million.