Gone are the days when the life insurance salesman was someone who went door-to-door with a briefcase and sat in your living room—or, more likely, your grandparents’ living room—to patiently explain options. These days, you don’t even have to visit or call insurers in order to purchase life insurance. You can simply buy it online.
The one potential drawback to this otherwise much easier approach is that understanding all the options can leave you feeling overwhelmed. You may not know what types of food they will be eating in 2050, but you can know that as a result of financially considering your loved ones via a life insurance policy they will be ok when you are gone. Below are a few things to ask yourself before moving ahead with your purchase.
How Much Do You Need?
More might seem better, and you may be tempted to over-insure your family because you are so afraid of leaving them without the money they need. However, over-insuring is a waste of money, and it isn’t necessary. Instead, figure out how much money your family will need a year for the number of years that you want them to be supported. This might be for as long as your children are minors. You may want to include enough to pay for their college education as well. Online calculators and even a chat with an insurance agent may reassure you that you’re aiming for the right amount.
Do You Want Your Policy to Be an Investment?
Many people don’t realize that you can sell, borrow against, or pull cash out of certain types of life insurance policies. You can review a guide on pulling cash out of your policy and decide whether this is an option you want to be able to have. You’ll need to purchase a professional indemnity insurance policy instead of a term one if you want these options to be available to you. It’s important to understand the benefits and drawbacks of taking money out. For example, it may be tax-free, but it may also mean there is less for your beneficiaries. You should also be aware that term life insurance may offer cheaper premiums than a permanent policy, but it does not have these additional benefits.
Do You Want to Be Able to Change It?
Some people want to be able to change their life insurance if their circumstances change later. If this is the case, you will want to make sure that you are purchasing a policy that allows you to do this. Without this element, you may end up having to simply purchase a new policy. This is not necessarily a bad thing, and some people do carry multiple policies. What’s important is that you know what your options are so that you don’t get an unpleasant surprise if you do want to make a change.
Do You Want Extras?
Some policies will allow you to add extra components. For example, there might be a terminal or critical illness cover that pays you if you develop a serious disease or bereavement counseling for your beneficiaries. You may want to look into what other extras may be available as well. Be sure that you understand the limitations if you purchase this additional cover and that you know what conditions are allowable under the terms.