How to Choose the Best Life Insurance to Meet Your Needs

Do you have employer-sponsored life insurance? Many Americans do. If that’s the only life insurance you carry on yourself, then you’re relying on that policy to support your family in the event of your death. The policy might be a sufficient amount to see your family through. In most cases, though, the amount of the policy won’t cover living expenses, college for your children, and other necessities your family will need. Therefore, you may want to consider buying additional life insurance. It’s not an easy task. There are several types of life insurance policies to consider. You’ll also have to decide how much life insurance coverage would secure your family’s future.

First, the size of the policy you need depends on several factors. For example, your life insurance will probably need to cover the costs of your funeral and burial. (Unless you have a Pre-Paid Funeral Plan, that is.) Any doctor and hospital bills that may be incurred during the illness or injury that led up to your death would need to be paid by your policy too. Then, there are estate taxes, day-to-day expenses of your family, and so on.

Usually, if the value of your life insurance policy is at least five to seven times your gross annual income, that amount should be enough to provide for your family’s needs.

Now that you know approximately how much coverage you need, it’s time to compare the different types of life insurance and decide which one is the best for you.

“Term” Life Insurance covers you for a set period of time, which can be from one to twenty years. It’s temporary insurance coverage. Some policies allow you to renew your policy after your first term is up. Your premium rates stay the same during the life of your term. Then, once that is up, and you renew your policy, the rates increase.

Even though the rates are initially lower for term life insurance, your premiums will rise as your age does. Another drawback in choosing this temporary insurance is that it might be more temporary than you think. There is no guarantee your policy will be renewed after it expires. And, term life insurance doesn’t gain cash value.

Permanent life insurance doesn’t cover you for a set period of time. Instead, it provides protection for as long as you live. Unlike the term life policy, this type of insurance may have a “cash value” or “cash surrender value.” If you cancel or “surrender” your permanent policy completely or partially, you may be able to get the cash value of it. Or, you may be able to borrow against your cash value. Policies vary, so you should check with your agent about the rules and regulations that apply to any life insurance policy you have.

Permanent life insurance is available in different types of coverage. Most people carry “Whole Life” or “Ordinary Life” protection. The premiums usually remain at the same amount throughout your lifetime. They are paid consistently.

“Universal Life” or “Adjustable Life” insurance gives you the option of paying for your insurance in any amount you wish, at any time, as long as you follow the company’s rules and regulations otherwise.

“Variable Life” insurance puts you more in charge of your insurance premiums. That is, you can decide how to divide your premiums among a number of investment opportunities. However, since the cash value of your policy will depend on how much money your investments do, or do not make, its amount will vary.

Before you visit an insurance agent in your area to discuss your needs, you can get more information by calling the National Insurance Consumer Helpline (NICH) at 1-800-942-4242. The helpline is open Monday thru Friday, from 8:00AM to 8:00PM.