Life insurance can be an important component of a financial plan, but what kind you choose and how much you purchase depends on your individual financial circumstances.
Here are six factors to consider when thinking about life insurance:
- Consider whether you need life insurance in the first place. You generally purchase life insurance in order to protect the people you leave behind. Don’t buy it unless you have a spouse, children or other people who are financially dependent on you.
- If you do need life insurance, consider which kind you need. Life insurance policies fall into one of two camps: Pure term policies and whole life policies. Pure term offers life insurance coverage only: You pay a premium and the policy pays your beneficiaries a certain amount when you die. Whole life combines term policies with an investment product to build cash value.
- Consider what term will meet your needs. For example, you’ll most likely want the policy to last as long as you have dependents. It’s a guessing game, but your advisor can help you make it less so.
- Think about what you can afford, but don’t leave yourself underinsured. Because whole life insurance is often more expensive than term life, many people purchasing whole life buy too little.
- Be a savvy buyer. It’s always a good idea to buy insurance when you’re young and healthy, because rates will usually rise for older individuals and those who are in less than optimal health.
- Always tell the truth when you apply for coverage; if you don’t disclose all relevant factors and then make a claim, the insurance company will investigate, deny the claim and likely cancel your policy.
Life insurance is no place to skimp. By consulting with your advisor before you purchase a plan, you’ll ensure that you have just the right amount of insurance for your needs.
For further information on the six factors to consider when buying life insurance, contact Brazelton Insurance Group today.