Should you get life insurance? If you have young children or other dependents, the questions might be a no-brainer. But even once you have decided that you need to get it, there are still a lot of other questions you may need answered. You should consider the points below as you choose the life insurance that is right for you and your situation.
You may wonder whether you need life insurance if you are young, healthy and do not have any dependents. Some people may want a policy to cover funeral expenses and debts so that those debts do not have to be paid out of the estate. But you may also be considering a policy simply because you are young and you assume it will be cheaper and easier to get. Life insurance is, in general, cheaper for younger people, but this should not be your sole reason for buying it, particularly if you are already in a tight financial situation. You can wait until you have a greater need for it later.
There are calculators online that can help you determine just how much coverage you need, but among the factors you should take into account are funeral expenses and the needs of your dependents. For example, you might want enough to cover your income until your children are adults. You may also want enough to cover their college or health care needs. Another consideration is any debts that could come out of your estate if left unpaid.
Another factor to consider is whether you want a policy that can also be an investment. Some policies acquire value over time, and rather than letting it lapse when you no longer need them, you might have the option of selling them through a life settlement. You can review a guide on this to help you decide if this would be the right choice for you. While this would not be for the full amount that would be paid out on a person’s death, it is generally a substantial sum, and it can represent a significant boost for retirement savings or other expenses.
You can purchase a term policy for a limited amount of time, or you can get a permanent policy. A term policy is generally not used for investment, so this is another factor to consider, but it is often cheaper and may be appropriate in some situations. Premiums for term insurance are locked in for the duration of the policy, but they can go up a lot if you renew.
You also need to take a careful look at the company that you are buying from. After all, you are depending on them to survive for decades so that they can pay out a big sum of money to you or your loved ones. Ratings agencies can give you a sense of a company’s financial strength. You should also choose a company that has a good customer service record. One way to check this is to look at companies that have a lower number of complaints made to state regulators.