How to Select Life Insurance
April 22, 2009 by Tom Martens
Filed under Health & Fitness
Purchasing life insurance coverage means different things to different people. When it’s time for you to select your life insurance coverage, the very first thing you should do is to write down your goals. Why do you need life insurance at the time’ Is it just to make it easier for your executor to take care of your final expenses’ Or do you have people you need to care for’ Whole life is a great tool if you are planning for big, once-in-a-lifetime expenses, such as college or retirement. Whole life also helps in retiring debt in case of death or disability, although term life might work for that, too. Consider exactly what you need your life insurance coverage to do before you decide which kind of policy is right one to buy. You may even find you need both whole and term coverage.
Second, you need to thoroughly examine your budget. Make sure you can afford life insurance. Figure out how much you can spend on premiums. Term life insurance tends to be cheaper. Those with temporary needs like a mortgage and child rearing expenses may find term insurance to fit their needs from both a goals and financial perspective. Others find that a permanent, whole life policy fits their needs, while others opt for a combination of term and whole life insurance policies. Whatever life insurance coverage you decide upon, make sure it fits into your budget as well. A qualified life insurance provider can discuss options with you.
Third, don’t forget to calculate your earning power, especially if you need life insurance for income replacement. Most of us assume a three percent annual raise when estimating earning power, and most of us retire when we are 65 years old. However, select the scenario that best suits you and your lifestyle when calculating your future earning power. You want to make sure you are realistic in this calculation so you can accurately select the life insurance product that best suits your needs.
Finally, consider what stage you are in life. It may be that all you need is a death benefit. But if you have people dependent on you for their income, you may need to leave them a great deal more. If you have dependents, make sure your income is replaced in the event of your death or incapacity. And if you need more money for your retirement than your social security checks and pension will provide, consider whole life as an investment tool.
Take a long, hard look at your goals, at your budget, and at your real earning power. Consider where you are in your life and what you want to accomplish in the years ahead. When you have clear goals in mind, then you can choose the life insurance coverage that is best for you.
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