A sudden death can leave behind a significant financial burden for your family members. In order to prevent unpaid debts, funeral expenses, and other costs from creating stress for your loved ones, it can be beneficial to have a life insurance policy that will pay a cash benefit in the event of your sudden passing.
Investing in the right life insurance policy can be challenging, but here are three tips you can use to ensure you buy the best policy to meet your unique needs.
1. Know your financial needs before buying.
An insurance agent can recommend coverage levels when you are purchasing a life insurance policy, but no one knows your financial situation better than you. Prior to looking into life insurance plans, you should take the time to become familiar with your financial needs.
Calculate the total amount of your debt, a rough estimate for your projected funeral expenses, and then add your annual salary to the mix. Ensuring that your policy provides enough coverage to pay for these items will allow your family members access to the financial help they need to support themselves after your passing.
2. Avoid unnecessary riders.
Once you have determined which type of life insurance policy is suited to meet your financial needs, your agent may suggest that you add on some additional plan benefits. These add-ons are commonly referred to as riders. Some common riders include an accelerated death benefit rider, a disability income rider, and a return of premium rider.
Although these add-ons might seem beneficial on the surface, you need to thoroughly examine each to determine how they fit into your insurance plan. Riders can add to the cost of your monthly premiums, so you should only add affordable riders that will genuinely benefit your family in the event of your death.
3. Opt for term life insurance.
There are two types of life insurance policies: whole-life policies and term life policies. You should opt to invest in a term life policy if you are young. These policies remain in effect for a specified number of years. Once the term expires, you can opt to renew the policy or upgrade to a new policy that reflects your updated financial needs.
Term life insurance allows you to make changes to your policy as your needs evolve, while a whole-life policy provides the same benefits over the course of your lifetime.
Understanding some of the considerations that you need to make when purchasing life insurance will help you invest in the policy best suited to meet your unique needs.