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When it comes to life insurance, you want to make the best decision for you and your family. Not only must you determine whether you need a policy, but you’ll also need to decide what type of insurance you need and how much coverage is sufficient. The following information will help you determine which product is best for you.

Your Guide to Choosing a Life Insurance Policy

What It Covers

Everyone should have a life insurance policy in place. If you’re the primary breadwinner for your family, how would they get by without your income? Would they be able to afford the same basic necessities, live the same lifestyle, or would your spouse need to take on an extra job? In addition to covering expenses for basic needs, a policy provides money for funeral costs and covers medical expenses related to end-of-life care. It can also help you establish funding for your kids' college educations, which is a concern for most parents. Lastly, life insurance can also help cover business planning for key executives and employees. 

Different Types of Life Insurance

life insuranceBefore settling on a policy, consider the options available. If you’re in search of basic coverage, term life might be the best option for you. This insurance is affordable, particularly for younger policyholders who are in good health. Term life policies are available for periods ranging from 10 years to 30 years, where you’ll need to pay a regular premium—which stays consistent throughout the term, but keep in mind that term policy’s premiums increase at every renewal and become more expensive as you age. 

Conversely, premiums for whole life coverage remain the same throughout the life of the policy. This is the preferred policy for people with restricted incomes who are worried about fluctuating costs as they get older, or people who want permanent protection through a guaranteed asset. Whole life insurance also grows a cash value throughout its life which is an essential part of retirement which makes it a good investment. A few add-ons, or riders, can be added to whole life include accidental death, spousal term insurance, premium waiver’s, accelerated death benefits, and Long Term Health Care.

Policy Loans & Dividends

There are a couple of additional benefits to whole life insurance policies. First is a policy loan, which allows you to borrow against the cash value of the policy. Cash value increases over time and the policy holder can take loans against the policy to finance many of life's purchases forgoing high interest charges from many banks. Loan rates are competitive to other loans and the interest is being paid back to your policy not another finance company saving you interest. 

Dividends are the second benefit of a whole life plan. Similar to investment dividends, these represent a portion of the insurance company’s profits. Read your policy’s fine print, though—dividends may not be guaranteed. They may be used in a few different ways, including as cash value or to use for a reduction in premiums or buy additional insurance. 

How Much Life Insurance Do I Need?

There is no easy answer to this question. Not only can you find online calculators, but you may hear about a few simple “rules” to help you figure this out. For instance, a simple formula is to multiply your income by 10 and add $100,000 per child. A more complex one is to use DIME, which factors in debt and final expenses, income, mortgage, and education. But the best way? Talk to an insurance agent. They can give you a more accurate picture of how much your family will need and what policy works best for your needs. 

 

In Villa Rica, GA, insurance agent Bradford Hegler of State Farm is dedicated to assisting his clients to make the right decisions for their lives. With more than 25 years of experience, he uses his considerable knowledge to ensure his neighbors have the coverage they need. Call (770) 456-4000 to schedule a consultation or visit him on Facebook to stay up-to-date on all the latest services.

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