Have you planned to buy a life insurance policy, but you are confused about choosing the right one? We get it! It is very challenging to choose the right life insurance policy as plenty of options available in the market. Here’s how to choose the right one and investing without missteps.
How to choose the right life insurance
Life insurance is an effective tool to protect a family and a business. On many occasions, different life circumstances, such as the death of a relative whose income was vital to the family or other risky situations, can jeopardize family wealth. Choosing the best life insurance is an important decision, for which some situations and variables must be considered so that the choice is correct.
Understand your reason for getting it
You should know the reason for getting life insurance and what type of insurance you need. If you are not the sole breadwinner of your family, you may not need this policy.
Learn about life insurance terms
It is important to familiarize yourself with the terms that usually appear in life insurance policies, such as, what type of coverage is covered in the policy, the sum insured, fundamental. It is the maximum amount that the insurance company will pay and, finally, the premium, which refers to the cost that the insured must pay for his policy.
Calculate the coverage you need
To make sure which is the best life insurance, you must first know what types of coverage we need; you must always analyze what the amount that will be paid for the service and what are the exclusions of each of the policies.
Consider permanent insurance
Life insurance experts especially recommend choosing permanent insurance. It does much of the work for you as it pays a higher premium than others. The permanent life insurance policy will give you a lot of benefits as you age.
Carefully choose the beneficiaries of life insurance
It is also essential to carefully select the beneficiaries of life insurance since; finally, these types of policies are a gesture of love and need for protection towards loved ones. Finally, it is necessary to obtain the most information about the policy’s exclusions, since these are the cases where the policy will not take effect.
How to figure out how much life insurance one needs
There are three ways to figure out how much life insurance one needs.
- Rule of thumb Approach:
This idea focuses on how much coverage a family needs to replace the breadwinner’s earning for living expenses.
- Income Replacement Approach
The method states that how much coverage needed that will equal how much the insured person will earn until his/her retirement.
- Needs Approach
The life insurance need of an individual is based on several calculations:
- Sum all of the short-term needs of an individual, such as debts, final expenses, and emergency expenses.
- Calculate all of the long-term debts of a person, such as a mortgage and a college tuition expenses.
- Calculate all the family maintenance expenses such as food, utility bills, clothing, and transportation.
- Calculate what resources (mutual funds, savings, and bonds) a person has to meet their needs.