If you are considering a life insurance policy, there are several factors you should consider before making the ultimate decision on which plan is best for you.
Here are the top five things to consider when it comes to choosing a life insurance policy.
As many may know, life insurance policies offer a death benefit that is paid out to the policyholder’s chosen beneficiaries. However, many may not know that some policies also provide living benefits for the policyholder.
Some policies accumulate a cash value, which can be borrowed against by the living policyholder. However, think of this as a loan. If you do not pay this amount back before your passing, the death benefit for your beneficiaries will be lower.
Choose Multiple Beneficiaries
Speaking of beneficiaries, it is usually best to choose more than one beneficiary to receive the death benefit. Granted, who your beneficiaries are and how many there are is ultimately up to you. However, if you choose only one primary beneficiary and they precede you in death, who will the death benefit go to?
For this specific reason, it would be best to choose at least two beneficiaries so you can ensure that the benefit will still be given to a trusted and cared-for individual.
Term or Permanent
Before deciding on a policy, you need to consider your health and if it would be best to purchase a term life policy or a permanent life policy.
Term life insurance is the easiest form of life insurance to qualify for and purchase because it only lasts for a specific time. Many terms last 10, 20, or 30 years, and are best used for policyholders expected to pass within that time frame.
Permanent life insurance, such as whole or universal, is not designated to a specific term but lasts from the time of purchase to death. To keep the policy active, the premium payments must be paid regularly. It’s also important to note that permanent life insurance policies cost more compared to term life.
To determine how much insurance you need, you can use the DIME method, which stands for Debt, Income, Mortgage, and Education. You will take all the costs that fall under these categories and add them together, giving you the amount you owe, which could ultimately fall into your loved ones’ hands after your passing.
By following this method, you will have a better understanding of how much insurance you need.
The Earlier, The Better
The cost of life insurance is based on health status and age. The younger and healthier you are, the less expensive a policy will be. As you get older, the more likely you are to develop health problems that will impact the premium payment. To avoid these costly premiums in your old age, consider purchasing a life insurance policy while younger.
For more information regarding life insurance policies, reach out to Joseph Cioffi Insurance today!