How to Choose Life Insurance
Life insurance, while an important part of every family's financial plan, is often ignored because it is found to be too confusing. There are so many choices involved in choosing life insurance and so many nuances to understand, that many people find it overwhelming. Combine that with the fact that it forces people to consider their own mortality and you have a a real recipe for ignorance.
Here are five quick and easy steps to help you choose life insurance policies that work for you, your family and your wallet.
1. Determine how much you an afford to spend on your life insurance. It is important to get the right amount of life insurance to support your family after your death, but if you can't afford the premium, it's worthless. Instead of deciding how much you need straight off the bat, look at how much premium you can afford to pay.
2. Compare the prices of different policies. If you have a very small budget and need a large amount of death benefit, you may need to start off with a term life insurance policy. Compare the premiums of a term policy, whole life policy, universal life policy (UL), variable universal life (VUL) policy and equity indexed universal life (EIUL) policy.
3. Consider your health. Term life insurance is only in-force for a certain number of years and once it reaches the end of its term, you will need to be underwritten again. If you are concerned that the increase in your age and potential health problems at the time of the termination of the policy will make a new policy unobtainable or too expensive, then you may wish to lock in the rates of the permanent policies (whole life, UL, VUL, EIUL).
4. Think about cash values and how you want them to grow. If you find you can only afford a term insurance policy, then you will have no cash values. If you can afford the UL, VUL, or EIUL, then you need to decide if you want your cash values to grow at a fixed rate (whole life or UL), a variable rate based on the underlying securities in your sub-accounts (VUL), or based on the performance of one of the stock market indicies (EIUL). Chances are the UL, VUL and EIUL have premiums that are not much more than term--but they also offer flexible premiums and permanent coverage, so these are often your best bet.
Your life insurance solution can be as unique as you are if you follow the above instructions and tailor your policy to meet all your needs.
