If your family members depend on you financially, or you have debts, you should definitely consider getting life insurance. It saves your family from financial troubles while they’re experiencing emotional pain. Life insurance might be great protection for your family, but before purchasing a policy, you should learn more about some very important things you must know about life insurance that will help you choose the best policy for you.
1. Whole life insurance is more expensive and has a lower death benefit
There are many different types of life insurance, and among them are term life insurance and whole life insurance. Whole life insurance accumulates cash value with time and lasts for as long as you live. Term life insurance is cheaper and provides coverage during a certain number of years, usually from 20 to 30. It protects your family members financially if you pass away, and there’s no cash value during your lifetime, but the payout is often higher than if you choose whole insurance. This is one of the things you must know about life insurance because most life insurance agents will try to convince you to purchase a more expensive policy.
2. Life insurance is not an investment
One of the things you probably won’t hear from your life insurance agent is that a life insurance policy isn’t an investment. Since whole life insurance policies have a cash value, which grows over time, most agents will mention that purchasing this policy is a great investment. Whether this is true in your case or not depends on your circumstances. Does anyone depend on your income? If not, you probably don’t need whole life insurance.
3. Calculate the size of the policy
A great way to calculate the size of the policy that you’ll purchase is to use the DIME calculation. Debt, income, mortgage, and education are important factors in determining how much life insurance you’ll need, and this is what DIME stands for. This way, you can make sure that your beneficiaries will be able to pay off your debts after you pass away. You should also add the cost of college tuition for your children if you have any, and the income that your family members depended on. Even though these will turn out to be big numbers, life insurance is not as expensive as you might think, and if you have people who depend on you financially, it surely pays off.
4. It’s cheaper when you’re younger
The younger you are, the more affordable will your premiums be. As you grow older, the cost will increase, so some life insurance agents encourage young, healthy people to purchase a policy because of this. Whether this is a wise thing to do or not again mostly depends on whether your family depends on your income.
5. You shouldn’t have just one beneficiary
One of the things you must know about life insurance is that it’s always a good idea to name a second beneficiary. If you name only one beneficiary and they pass away before you, your family will have to go through a lot to access the money. Naming a secondary and even the final beneficiary is always a good choice to prevent unnecessary difficulties if anything would happen.
6. Regularly review your life insurance policy
Don’t forget about your policy once you purchase life insurance. Your circumstances might change every once in a while, so check your policy once every year to ensure that you have the coverage that you need. This is one of the important things you must know about life insurance because you might experience life changes such as moving, having a baby, or changing jobs which might mean that you need to update the life insurance policy that you have.
7. Not all causes of death are covered by life insurance
Things you must know about life insurance include the causes of death it covers. Make sure to check under which circumstances your life insurance policy wouldn’t pay out even though the coverage period didn’t pass. Life insurance usually doesn’t payout in the case of dangerous activities, such as bungee jumping and sky diving, or suicide. Your life insurance might not mention the causes of death that aren’t covered by the life insurance policy that you’re about to purchase, so make sure to ask about this.
Find out more about the things you probably won’t hear from your life insurance agent to make sure that you choose the best life insurance policy for you if you really need life insurance!