Deciding on a life insurance policy is a complex process emphasis Peter DeCaprio. Among the many insurance providers and policies available, it can be very intimidating to settle on one that works best for you. In fact, confusion regarding which policy to purchase, how much coverage to get, and which service provider to opt for are some of the main reasons why people give up on investing in life insurance altogether. However, John Doe is here to help you out. Listed below are a few tips that can make choosing a life insurance policy much easier if kept in mind.
Determine How Much Coverage You Need:
To determine which type of insurance you need and how much, you must start by examining your current financial situation. The amount of coverage you need depends on three things:
- Savings that you currently have
- Number of dependents
- Financial requirements of dependents
Start by evaluating all available assets, including emergency funds, retirement savings, and life insurance coverage from work. Next, assess the financial needs your dependents will have after your demise. People often tend to underestimate how much life insurance they’ll need. Apart from significant debts like a mortgage, it is also vital to consider other expenses like assisting your spouse to pay bills, supporting children, paying their tuition fees, and fulfilling their long-term needs. John Doe suggests opting for a policy with a death benefit equivalent to 10 times your annual pay.
Select the Type of Insurance:
Essentially, you’ll have to choose from three types of life insurance policies. These include:
- Term Life: Only valid for a specific period. A term policy has lower premiums and is perfect for those on a tight budget. This kind of policy doesn’t have a savings component and only provides cash value in case of death.
- Permanent Life: This policy is relatively expensive as it remains intact for the policyholder’s entire lifetime. Permanent life insurance offers death benefits and a savings account that builds cash value. This cash can be used to cover emergencies, medical bills, long-term care, and even policy premiums.
Consider Factors Affecting the Rate of Life Insurance:
When choosing a life insurance policy, John Doe recommends keeping in mind two key factors, your age, and your health. Generally, the younger you are, the cheaper your insurance policy will be says Peter DeCaprio. That is because clients are healthier and less risky to insure at a young age. But as your age increases, your health deteriorates, which results in higher premiums. Some providers may even ask you to undergo a health assessment as a part of the application process. People with terminal illnesses and specific health conditions must pay a more significant premium.
Riders are additional benefits that policyholders can buy and add to their life insurance. It is a simple way of customizing a policy and ensuring that it fulfills your requirements. While purchasing a rider means you’ll have to pay extra, the amount is relatively low because little underwriting is required. Some common riders that you may want to consider include:
- Accidental Death: This rider pays ensures that an additional amount of death benefit is paid to the beneficiary if the insured dies an accidental death.
- Waiver of Premium: According to this rider, all future premiums are waived off if the insured becomes terminally ill, permanently disabled, and loses their source of income.
- Family Income Benefit: This rider ensures that a steady flow of income is provided to family members in case of the insured’s demise
- Accelerated Death Benefit: Under this rider, if the insured suffers from a terminal illness that can shorten their lifespan, they are allowed to use a portion of their death benefit.
While choosing a life insurance policy may feel overwhelming, it is worthwhile. By investing in this policy, you ensure the financial security of your loved ones even in your absence says Peter DeCaprio. It is an easy way to support and care for your dependents in the long run.