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5 Key Factors to Consider When Choosing a Life Insurance Policy | Tips From Our Financial Advisors Thumbnail

5 Key Factors to Consider When Choosing a Life Insurance Policy | Tips From Our Financial Advisors

Choosing the right life insurance is an important step in your financial life. It can provide a safety net for your loved ones and give you the ability to leave a lasting legacy behind. An important part of picking the right insurance plan for you, includes getting to know the key differences between the insurance options that are available to you. This will include selecting a middle ground option between a payment you can afford and the financial benefit you want for your family members and beneficiaries. 

While there are many items to consider, here are the most important facts you need to know:

1. The Type of Life Insurance Policy

There are two primary categories: term life insurance and whole life insurance. 

  • Term Life Insurance: With term life insurance, you will have coverage during a set period of time (5, 10, 15, 20+ years). Within this time frame, you will pay a premium and your beneficiaries will receive a death benefit should you die. If this period ends and you choose not to convert or renew the policy, you will stop paying the premium and you will no longer be covered by the policy. 
  • Whole Life Insurance: Typically viewed as an investment, whole life insurance will cover you for your entire lifespan, from the date that you first enroll for coverage. There is no end date for this type of policy. As time passes, your life insurance policy will build a cash value which you can choose to use as a loan or cash out at the time of maturity.

Between these two types of insurance, term life insurance is typically more affordable with lower monthly payments. For someone who is simply looking for an affordable plan that will take care of their children through their college years, this type of plan may best fit their needs. Other individuals who can afford a higher premium and are searching for a more serious investment opportunity may be interested in whole life insurance. As you begin to weigh your life insurance policy options, it’s important to consider your unique and individual needs. Your personal circumstances should be the deciding factor in which plan you choose. 

2. Tailored Pricing to Meet Your Needs

Prices for life insurance policies will vary based on the type of policy, the provider, and your individual circumstances. While you’re still in the market for a policy and comparing prices, you will want to look for a policy that fits your needs around the following items: your current health, your smoking habits, your risk behavior, your travel, and any other indicators. Policies can range from generic to highly tailored, meaning that you could either benefit from discounts for a healthy lifestyle or pay higher premiums for a more comprehensive plan. 

3. Selecting an Affordable Plan

Choosing a life insurance plan that is affordable for you and your family is critical. The main purpose of having life insurance is to provide financial safety for you and your loved ones after your passing. Still, this should not put you under financial strain or deprive you from your financial life today. Choose a policy that will fit your budget and lifestyle in a comfortable way - even if times were to get rough in the future.

When under financial pressure, many families end up letting go of their life insurance. Choosing an affordable policy from the start can help you to avoid this. Furthermore, if you pause or cancel your policy, it could be a challenge to obtain a new policy, especially if your health situation has changed or declined.  

4. How to Convert Your Policy

Once you have reached the final year or two of your term life insurance policy, you can often still choose to keep it active. Some life insurance policies offer a conversion feature, allowing you to convert the policy to a lasting one. A significant benefit to this feature is that you can avoid the need to start from scratch with a new policy. This is especially beneficial if you purchased your policy several decades ago and have experienced significant health changes. A new illness or decline in health could make it difficult to obtain a new policy. 

5. Living Benefits

It is critical to prioritize a life insurance policy that will offer you benefits while you are still living. Some policies provide you with the opportunity to take premiums that you already paid back out to cover medical expenses, cancer treatments, and needed care.

Of course, you will need to remember that any funds that are removed from your policy will lessen the amount that your beneficiaries will receive. Even still, this option could save you and your loved ones from a financial battle against health expenses down the road.

It is important to know that after you are gone, your family and loved ones will be taken care of, especially in the case of an unexpected event. Setting aside time now to review your options and choose a plan that is right for you can make a significant impact in how your policy benefits you and your family later in life. If you are working with an agent or one of our financial advisors, ask them to help you review your options carefully. This will help to empower you and your family's financial future. 

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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