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When searching for life insurance online, it can feel like there are too many options to choose from and it can get confusing. It’s easy to be tempted to do without coverage, but it can be an important financial planning tool that can protect your loved ones if anything happens to you.
Understanding Policy Types
You can consider whole and term life insurance when getting coverage. Term offers coverage for a specified amount of time, which can range from 10 to 30 or more years, depending on your needs at the time. It is more affordable and can be simpler than other types. However, if you are looking for coverage for the rest of your life, consider permanent insurance. And other types offer a cash value component.
If you currently have one type but are thinking about getting another, you are not locked into one kind forever, even if you still have time left on the policy. Look into your current policy’s cash surrender value. It allows you to receive a certain amount of cash for the policy, which you can then put toward new coverage that suits your needs better. Reviewing a guide on the value of surrendering your policy will help you better understand this concept.
Understand Your Coverage Needs
Many times, people think only of the amount of insurance they would need to pay off their mortgage and then call it good. However, you will also want to think about the amount you would need for everyday living expenses, college tuition for kids, childcare, or anything else that might come up in the future. These are money saving tips to consider because while you do not want to cut corners, the size of your policy will affect your monthly premiums. Depending on your current income, you might want to go for a death benefit that is the same or equal to 10 times your annual income. However, depending on how much you are making, you might get more or less that coverage.
Understanding Factors That Affect Rates
Your age and health are two factors that affect your rates, playing a major role in the amount you can expect to pay for the policy you receive. If you are younger when getting coverage, you likely will not need to pay as much as if you were older. Younger people tend to be a bit healthier, so you do not pose as much as a risk to the company as someone who is older and more likely to pass away from health complications.
Of course, other factors, such as your job and even leisure activities, can affect rates as well. For example, someone who regularly goes scuba diving, mountain climbing, or skydiving will likely pay higher rates than someone who prefers to sit at home and cross stitch. And someone at a desk job is less risky to insure than someone whose job requires a lot more physical activity.
The policy type and death benefit will also partly determine the rate you must pay. A higher death benefit will require a higher premium each month. And with term coverage, the length of coverage will play into how much you are charged every month, while cash value type policies will also come at a higher cost.
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