What is Life Insurance?

Life Insurance is a contract that protects you against the financial risk of your own death or someone’s dependents death in exchange for an agreed upon premium payment, with no need to pay-in when collecting benefits if either event occurs. Life insurance protects your family’s financial future. It also provides a sense of peace-of-mind for loved ones left behind. Life insurance can be used to help pay off debt, keep the same lifestyle you’re living now, or fund an education for your children. Some policies offer tax savings and other benefits like mortgage protection and financial planning.

If you’re thinking about purchasing life insurance, it’s important to compare several offers in order to understand how these policies work.

The Benefits of Comparing Life Insurance

Knowing the benefits of comparing life insurance will ultimately save you time and money. Compare life insurance to find the best policy for you and your family’s needs that fits within your budget. Doing this research can save you stress, worry, time, and money in the long run. If you’ve ever been faced with purchasing a new life insurance policy before, then you understand how difficult it can be to make a decision without all of the facts at hand. The last thing you want is to purchase a new life insurance policy by accident or out of fear. Comparing life cover ensures that you are receiving the best policy for your situation.

When comparing life insurance, ask yourself some key questions. First, why are you purchasing a new insurance policy? Do you need to provide long-term protection for your spouse or children or do you need the money immediately in the event of your death? Are you able to wait until your new policy kicks in before your family is financially secure, or do they need the money immediately? If so, what do they need and how much will it take to get them by temporarily?

These answers should point you in the direction of what type of policy is best for you and how long term you want that policy to be. Think about whether you want a permanent life insurance plan for your family or some kind of temporary coverage.

Should I get life insurance?

No one wants to think about the possibility of dying — no one. But a life insurance policy can be very helpful if something does happen, and it’s best to take steps early on in your life rather than later. So, do you need a life insurance policy? Read on for some important considerations – and then make up your own mind.

How much life insurance do you need?

Life insurance is usually sold in terms of a multiple of your annual salary, so the amount you choose should depend on what other needs you have and how much income you’d like to replace. For example, if your family’s mortgage and other bills eat up most of your pay each month but there are still some expenses that would need to be covered by savings if something happened, then you might want a policy equal to twice your annual salary. If no one is relying on your income for support and the family’s bills are already paid through investments or savings, then it might only make sense to get enough coverage for one year’s salary.

What about disability insurance?

Some experts also recommend buying disability insurance if you can. It often covers the same sorts of things that life insurance does, including your mortgage and the income you’d need to support your family if you couldn’t work for a long time. But it’s usually cheaper than life insurance – especially if you don’t smoke or have any pre-existing conditions – and it could be less necessary as well. If your family could survive financially without counting on your income and there are other people who could step in to help out (like a parent or spouse), then it might not make sense to bother with this coverage.

What do I need to understand before buying life insurance?

There are some important things to know about a policy and some things that you might be able to learn by speaking with someone who already has one – or by reading up on how your state handles this issue. Read on for all the details.

The most important thing to think about is the “term of insurance” – that is, the time period during which payments are made, usually from a single premium payment. If you don’t have enough insurance for the term of your choosing (typically five years) then make sure you think about the other options, like paying a higher premium in exchange for more coverage. The amount of the annual premium is also important, because if it’s too high, you’ll end up paying for more coverage than you need.

Next it’s important to understand what happens if you die – and how the insurance company pays beneficiaries. If you buy a whole life policy, for example, your loved ones will likely get the death benefit first — but after taxes are withheld from that amount (the “taxed amount” — see below). You’ll usually get to keep any part of the death benefit that’s left over. If you buy term life insurance, on the other hand, your beneficiaries will get a regular income from the policy for as long as it’s in force.

You should also think about the “form of the death benefit,” which is whether or not you want to be paid out in a lump sum or if you’d prefer a regular payment. If you choose a lump sum, make sure your family gets it quickly – and that there are no extra fees involved.

Finally, know what kind of underwriting the insurance company will do before deciding whether or not to buy a policy. In other words, how much will they check into your health and other personal details before agreeing to cover you? If they’re going to ask for a lot of information about your past medical history, for example, then it might not be worth it. But if they’ll only check for something like if you smoke or have diabetes – and only look at claims from the last ten years – that might be fine. (It’s also worth noting that in most cases an insurance company can deny coverage or rescind its agreement to cover you at any time for non-disclosures. And if they do, there are usually no refunds.