The Complete, Easy to Understand Guide to Life Insurance

When you think about caring for your loved ones, you likely think about keeping a roof over their heads, putting food on the table, and showing that you love them daily. But what would happen if you were no longer around to do those things?

red life jackets hung up

Your family would find it hard to make ends meet. Life insurance can help cover those unexpected expenses, but many people haven’t gotten around to buying a policy. In fact, over 40 percent of people who need the coverage don’t have it.

If you’re buying a policy for the first time, you may not know what to expect or how to look for great coverage. Here’s a simple guide to help.

Know When You Need It

Believe it or not, not everyone needs life insurance. It all depends on your personal financial situation, goals, and concerns.

For example, a person fresh out of college with few assets and few debts won’t benefit from having a policy. However, a person with a spouse, a child, and financial responsibilities should almost always invest in life insurance.

Think about the things you have in your life.

Do you have a mortgage you have to pay? Are you worried about your family’s future if you were no longer around to support them financially?

If so, a life insurance policy is well worth it. If not, you may put off buying coverage a little longer. If you’re unsure, contact an insurance agent to discuss your needs and concerns.

Understand the Basic Types of Life Insurance

Life insurance isn’t a standard policy. There are two main coverage types and the type you choose depends on personal preference. Both options will protect your loved ones.

Term Life Insurance

Term life insurance is a policy that lasts for a set number of years. Most have terms of 15, 20, and 25 years.

Each month, you pay your premium for that coverage until the term runs out. When it does, you’re free to let coverage lapse or renew the policy for another term.

Term life insurance is often cheaper and ideal for people who just want to protect their families from the surprise expenses that pop up if they pass away unexpectedly.

Whole Life Insurance

Whole life coverage lasts as long as you’re alive. Like term life policies, you pay a premium each month, but part of that premium gets used in an investment pool.

The returns on the amount used in the investment pool can get used to increase your payout amount for your beneficiaries. But you can also take that money out while you’re alive.

If you have a loved one that will be financially dependent on you for life or just want to avoid the hassle of remembering to renew your policy, whole life coverage is a great choice. However, it does typically cost more each month.

Your insurance agent can help you figure out which type of coverage is right for your needs.

Think About How Much You Need

You don’t have to purchase a $2.5 million policy if you’re interested in life insurance. In fact, you can buy a policy with as little as a $10,000 payout if that’s what you can afford. Anything is better than not having a policy in place.

However, if you’re looking to get the most out of your coverage, you must choose the right amount of insurance, not just arbitrarily pick a number that sounds good.

The best way to do this is to think about your current expenses. How much money does your family need each month to get by without wanting for anything?

You’ll also want to think about end-of-life expenses. The average funeral costs more than $7,360 and if you have medical bills, your family will have to cover those costs.

Buying enough life insurance to help your loved ones avoid dipping into their savings is always a great idea. Keep in mind that you can always increase your coverage if things change.

Figure Out Who Your Beneficiaries Are

When you buy a life insurance policy, you must designate beneficiaries. These are the people who will receive payouts from your policy if you pass away.

It doesn’t matter who these people are. You’re free to choose your immediate family, friends, charities, or even your alma mater. It all depends on your preference.

Since life is unpredictable and situations change quickly, you’re free to change who those beneficiaries are at any time. Just make sure to notify your insurance representative as soon as you need to designate a new beneficiary.

If it’s not updated in your policy, the people you named initially will be the ones to receive a payout, even if you didn’t want them to.

Always Shop Around

Different insurance providers offer coverage at different prices. You won’t know what those prices are until you get quotes.

Don’t settle on the first policy you find. Get quotes from multiple providers and choose the one that offers you the best coverage amount at the best price.

If you’re not comfortable with the options one provider has, keep looking. There’s a perfect policy for your needs. You just might not find it immediately.

Review Your Coverage Needs Regularly

Things change quickly. This means the coverage amount you bought initially may not be enough to fully protect your loved ones.

Each year, look at your finances and think about the amount of coverage you have in place. If it feels like it’s not enough, you may want to look into buying an additional policy or increasing your coverage amounts.

It’s always best to err on the side of caution and buy more coverage than you think you’ll need.

Ready to Buy a Policy?

Life insurance is one of the best ways to protect the people you love from undue financial strain. This guide should help you better understand what to look for and what to think about when choosing your first policy.

If you’re ready to make the leap, don’t wait. Contact us to speak with an experienced insurance agent.

We’ll help you find the perfect policy for your needs whether you’re looking for a whole life policy or term-life coverage.