A licensed life insurance expert or financial planner can help you figure out which type of life insurance is best for you, but you can also ask yourself a few quick questions about the needs of yourself and your family :
- How much can I afford to pay each month for life insurance? If budget is a concern, definitely go with term life insurance, as it’s much cheaper.
- What are my assets, debts and estate value? If your estate will be subject to the estate tax, a whole life policy can help cover that.
- Do I expect to self-insure in the future? If you go with term life, you need to be OK with your coverage running out and you’ll need to self-insure.
- What are my goals for my life insurance? If you just want to cover expenses for your family, go with term. If you want to build cash value, choose whole.
- What do I want to leave behind for my loved ones? The death benefit of a term life policy can go directly to your family, while a whole life policy is usually used to pay for the estate tax.
By asking these questions, and knowing how term and whole life address each of them, you can make the right choice for yourself and your family.
you may keep in mind more while choosing policies a few things you must know before you buy a life insurance policy.
Life insurance is not an investment tool
Coverage you need
Premium frequency
Life insurance riders
Compare policy
Tenure of the policy
Mention everything on the application
Definitions of some terms used in insurance industry
here are differences between term and whole life insurance, but some concepts are the same across types. No matter what type of insurance you choose, here are some basic definitions you need to know.
- Policyholder — The owner of the life insurance policy.
- Premium — The money a policyholder pays, monthly or annually, to keep a life insurance policy active. If it’s not paid, the policy lapses.
- Death Benefit — A (usually tax-free) lump sum of money paid out upon the death of the policyholder.
- Beneficiary — The person(s) or institution that receives the death benefit.
- Rider — A contractual modification to a policy to customize certain provisions.
- Underwriting — The process by which an insurance company looks at an applicant’s financial and health history to set the final premium rate.
No matter what kind of life insurance you buy, make sure to shop around and compare quotes for the best rate. Everyone is different and each life insurers has its own methods for assessing applicants, so you may get a much cheaper rate with one insurer than another.