The idea of purchasing life insurance may not be the most fun thing in the world—after all, it forces you to think about the inevitable fact that you will pass from this world someday. But, if you want to provide properly for your loved ones, especially in the event that you die unexpectedly during a time when the mortgage is still being paid off and the kids have yet to go to college, you want to have a solid policy in place. Like other types of insurance, there are different kinds with different features, and the best one will depend on your individual needs; while I cannot cover every consideration here, I would like to highlight some of the more important ones to get you started.
Deciding Between Term and Whole Life
There are two basic types of life insurance and the best one for you is dependent on many individual factors. Term life insurance is for protection only and will pay out the amount of the policy upon your death; like the name states, it is for a specific term, which usually ranges up to 30 years. Whole life insurance offers this same protection component but also offers a way to build up a cash value in the form of investments. Whether or not life insurance is the best route to go as far as building up savings is a matter of debate and if this appeals to you, you should work with a knowledgeable provider for more information. This type of insurance is much more expensive and if you are mainly interested in life insurance to offer financial protection to your family, term is the best way to go. If you opt for whole life, the best type will ultimately depend on your financial goals, how much control you want over deciding the investments and your comfort level when it comes to risk.
How Much Do You Need?
There is no set answer when it comes to this question. To best meet your family’s needs, it is important to really sit down and figure out your financial situation. Do you have a mortgage or credit card debt? Do you have children or elderly relatives who rely on you for support. What financial contributions does your spouse make? If your spouse is currently at home and would possibly need to get a job, you might factor in the costs of daycare or babysitters. Many financial experts offer a general financial rule of thumb that suggests multiplying your income by between five and 10 depending on your debts and number of dependents. Avoid being swayed by agents who work on commission to purchase higher amounts than you really think you need. While they can offer helpful information, ultimately, no one is more familiar with you and your family’s finances and what they need to live than you.
Getting Optimal Rates
Naturally, insurance companies are going to want to know a lot about your health and the better it is, the lower your premium. It is important to be completely honest since failure to disclose certain information may jeopardize payout upon your death and that is the last thing you want to happen to your family. If you have quit smoking for at least a year upon applying for a policy, that may help you get non-smoker rates, though some carriers require three to five years off cigarettes for their best rates. High cholesterol works against you big time so that is something you may want to get under control before policy shopping. Being in less than perfect health is not always a major blow, however; provided you are receiving proper treatment and taking reasonable steps to manage your issues, you may still get normal rates; examples include non-insulin dependent diabetes, high blood pressure, digestive problems and asthma.
Kelli Cooper is a freelance writer who has written extensively about various types of insurance policies; check out Kanetix for more information on Canadian life insurance and quote comparisons.