Buying life insurance doesn’t have to drain the bank. In fact, the right plan should not have that effect. Being able to pay rent, take care of your body and health, and cover all of your expenses is still top priority. That being said, there are ways to budget and buy the right insurance for your personal finances.
Many people believe that life insurance is only for those with a lot of discretionary income sitting around. Here, we disprove that myth and explain why you should get life insurance. Here are some life insurance tips and advice in order to find the best plan for you.
1) Find out how much coverage you need
Part of the reason for the variation in life insurance policies is that not everyone has the same lifestyle. Your annual salary and what you spend money on is likely to be different from the income and expenses of your neighbors or friends.
The best place to start when figuring out how much life insurance you should have is to calculate your annual income as well as your expenses. With those two figures on hand, you can more accurately calculate the amount of financial assistance your family would need if you were to pass away.
Be realistic with these amounts, because it is not helpful to underestimate or overestimate by a long shot. Of course, it’s hard to know exactly how much financial assistance your family may need, but a ballpark figure can help keep your premium low.
Look at your family’s current & future expenses
Life insurance helps provide financial assistance to your loved ones. These funds, called death benefits, should be used to pay for your family’s expenses. So, it makes sense to calculate those expenses prior to picking a life insurance policy. Your expenses will likely change over time. Plan for your current situation and for the future.
When calculating your expenses, consider the cost of the following:
- Mortgage
- Auto loan(s)
- School loan(s)
- Personal loans or other debt
- Living expenses (food, utilities, etc.)
- Childcare
- Education tuition for your children
- Medical care for aging parents, including home care or an assisted living facility
- Funeral costs
- End-of-life medical care
- A financial cushion for your family
Assess your current worth
If you were to pass away, what savings could your family pull from in order to pay the bills? Do you have a healthy savings account, thriving investments, or any other assets? Figure out what your current worth is, and then subtract the amount from your expenses.
2) Consider your age
Did you know that the older you are, the more you can expect to pay for life insurance premiums? You can cut premium costs by getting life insurance as a young adult.
3) Length-of-term options
The next question to answer is how long do you need coverage for? Depending on the length of time you want to be covered, your life insurance policy cost may rise or drop. Generally speaking, the longer the term coverage, the higher your life insurance premium will be.
When weighing your options for life insurance term length, keep in mind that one of the biggest determining factors of term length needs is kids. If you have kids, especially young ones, you should probably get at least enough life insurance coverage to support them until — or through — college.
When trying to figure out how much life insurance should cost, you’ll also need to consider how much is left to pay on your mortgage and other loans. Term life insurance policies cover you for a set amount of time, while permanent life insurance policies (also called whole life insurance) may last for your entire life.
The cost of whole life insurance is substantially higher than premiums for term life insurance. If you are on a budget, term life insurance may be a better option.
4) Always compare policy offers and obtain quotes
It may take some time to get sufficient quotes for different life insurance policies, but it can be done without cost. You can almost always get a quote for free, and it’s worth the time. Finding the best coverage based on your needs and your budget can save you a lot of money in the long-run. Jumpstart the process by getting a free quote for our life insurance policy options now.
While comparing policies, it can be a good idea to resist choosing the least expensive policy. Rather, identify and secure the policy that fits your needs and will help give you some peace of mind knowing that your family will receive adequate financial help.