If you are supporting a family or loved one, then you are probably looking for the right life insurance policy so that their needs are met in case something happens to you. If you’re not looking then you need to be!
Most people believe they need life insurance, but according to a study by ING, 44% are not confident that they have the right kind of life insurance or they right amount. If you are in this camp, here are a number of considerations you will have to make in order to find the right life insurance policy for you.
Understanding what each type of life insurance policy does and how it works for you is key when conducting a search for a life insurance policy.
Basically, there are three types of life insurance;
- Term Life
- Whole Life (Permanent)
- Return of Premium
By taking a little time to do some research, you will quickly discover the right life insurance policy that meets the needs of your family while fitting within your budget.
Term is Cheap and Easy
Many people are under the impression that a $1 million dollar term policy will cost them hundreds of dollars per month. That is completely not the case. For example, a $1 million 20-year term policy for a healthy 30 year-old will only run you about $415 per year. $1 million of life insurance might sound like more than what you need (for many it’s not). However, if you feel you need less, a $250k policy will cost you $150 per year. Just in case you don’t have a calculator handy, that’s $12.50 a month. Now try to convince me that you can’t afford life insurance.
Low cost term insurance is easy to buy since nowadays there are so many options online. Most sites even have nifty life insurance calculators that make it snap to figure how much you really need to buy. Simply calculate the amount of coverage you need and shop for the lowest price. However, the downside is contained in the name “term” in that it does expire. If you outlive the policy or cancel it at any time, you do not get a single penny back.
For many people this does work because by the time their term insurance is over, the kids are all grown up and they have saved up for retirement.
Insurance for Your Whole Life
Unlike term life insurance, whole life never expires as long as you pay the premiums. So no matter how old you get, as long as the policy is paid you will leave something to your loved ones.
However, whole life policies are not cheap and are basically a way to force you to save money. One big advantage however is that whole life policies will be around as long as you continue to pay on them. While many assume that they won’t need life insurance well into their 60’s, I’ve helped many baby boomer secure life insurance because their term policies had expired.
Return of Premium
This is sort of a hybrid between term and whole life. While a death benefit is paid if you should pass before the term expires, if you live past that point, you get all of the money you invested back.
Return of premium is easy to buy since it’s carried by numerous companies and is very affordable. The one downside is that the money you invested does not grow under the policy. You get the same return rate as if you hid the money under a mattress. Also, you must keep the policy for the entire term to get your full premium back. If you stop paying on it soon, you either forfeit the entire premium paid or at least a pro-rata share.
Finding the right policy for your needs means evaluating which type of life insurance works best for you and finding the right company and rates to fit your budget. When shopping for the best life insurance quotes, knowing what you need is most of the battle.
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Return of premium is not talked about a lot, but could be very advantageous for a lot of people who are the in the middle ground of term versus whole life. It’s just another way to save money. People will generally pay their bills on time. So if your savings is in the form of a bill, chances are, you’ll pay in.
What if you are a cancer survivor and they have very high premiums during the first 3 years at least of the term. In my late 30’s finally settling down, what insurance, if any is best?
Jeff, yes, there maybe can be a place for Whole Life or ROP. For people who are well-off, it can be a convenient option to insure a business partner or loan, bequeath a charity, pay estate taxes, or leave a legacy to heirs. These folks already have all the other investments.
But that is not most people. For the other 99%, term life insurance is needed to cover dependents for purposes of: Income replacement, Financial security for dependents, Mortgage protection, College funding, Final/burial expenses.
The typical profile of a term life insurance owner is someone who is a family breadwinner and has minimal savings. It is critical protection. If you are in this category and aren’t insured, get insured now.
You can visit an online quote engine to compare term life insurance prices, where you can look at the rates offered by dozens of the best companies.
Choosing the right life insurance policy requires a lot of time, research and decision making. To help you decide which policy should you acquire is to seek information from other people by asking how they are being treated while at the company, how is their services and generally research about the industry alone and try to read news update about the insurance policy provider that you have in mind.
Great post explaining the available options for life insurance. Term insurance is probably to most appropriate for most people since is keeps costs down and is applicable for the 20 or so years that the children are growing up.
What a brilliant article. Life insurance is a real minefield and understanding the core policies available is an excellent starting point and makes decision making slightly easier. It still means that you might be scouring lots of different companies for products that meet your criteria, but knowing what you are looking for in the first place is key! Very very helpful :)
Thanks for sharing these tips. Finding a life insurance should be taken cared of personally. We can’t afford to leave our family without making sure that they still comfortably.