Choosing the Right Life Insurance Policy

As hard as it may be to think about death, it’s a fact of life that we all have to face. Leaving your loved ones behind to deal with your death, financial burdens, and an uncertain future is a heartbreaking thought. But, with life insurance, you can rest assured that when you die your family will be provided for. Choosing a life insurance policy isn’t easy. In fact, it can be confusing and if you choose incorrectly, costly. Here are a few tips to help make the decision-making process easier for you. For a deeper, step-by-step walkthrough, see our Life Insurance Buyer’s Guide.

What Is Life Insurance?

In basic terms, a life insurance policy is an agreement between you and the insurer. You agree to pay monthly premiums in exchange for a payout of benefits to be made to your selected beneficiary or beneficiaries. Not all life insurance policies are the same, however, and it’s important to choose the right policy to suit your needs now and your beneficiaries needs in the future. Reasons for having life insurance include:

• Providing for your family, spouse or other loved-one after your death, so they can live comfortably.
• Paying for final expenses such as your funeral, unpaid debts, and other obligations so your family doesn’t have to.
• Donating money to a charity or other organization, so they can continue their work.
• Paying estate taxes so your beneficiaries won’t incur any debt.
• Securing a mortgage or other loan if required by the lender.

What Types of Life Insurance Policies Are Available?

Basically, there are two types of life insurance policies that you can purchase, term life insurance and permanent life insurance. There are pros and cons to each type and it’s important to understand the differences before you decide.

Term Life Insurance

As the name implies, a term life insurance policy is only good for a specific length of time, generally this is between 10 and 30 years. The policy has no cash value, and expires at the end of term. The advantage of this type of policy is that it’s usually less expensive than other types. The disadvantage of most term life insurance policies, however, is that if the death benefit isn’t paid out before the term ends, your premiums are lost and you won’t have life insurance coverage. There are three main types of term life insurance:

• Annual Renewable Term Policies – Premiums increase each year throughout the term. Good for temporary coverage gaps.
• Decreasing Term Policies – Premiums stay the same, but the death benefit decreases over time. Often used for mortgages.
• Return of Premium Term Policies – The most expensive; premiums are returned if you outlive the policy.

Permanent Life Insurance

Another type of life insurance policy to consider is a permanent life insurance policy. The advantages to this type of policy include fixed premiums and a fixed payout upon your death. Whole life policies also build cash value that you can borrow against. Two main types are:

• Whole Life Insurance – Fixed monthly premiums, policy doesn’t expire as long as premiums are paid, built-up cash value returned if canceled.
• Universal Life Insurance – Flexible options, allows you to choose investments, builds cash value, can borrow from the policy.

Which Type of Life Insurance Is Best?

The short answer is, it depends. Age, ability to pay premiums, dependents’ needs, and financial goals all influence your choice. Discuss your options with a licensed insurance agent for guidance.

How Much Life Insurance Should I Have?

Coverage depends on several factors. Consider:

• Your Current and Potential Annual Salary – Ensure your family can maintain their lifestyle.
• Your Children’s Future College Tuition – Plan for increased tuition costs.
• Funeral and Burial Expenses – Policy should cover final expenses.
• Your Mortgage Balance – Ensure benefits cover any remaining balance.

Request a Life Insurance Quote Today

The best way to ensure your family is cared for is with a life insurance policy. Call Amerus Financial Group at 1-800-596-1474 or complete our online form for a free, no-obligation quote or assistance from an experienced agent.

This life insurance guide was created by Amerus Insurance Group, helping families protect what matters most with affordable coverage designed for every stage of life. From term life and whole life to final expense solutions, our agents shop the top carriers to find the best value for your needs. Request your personalized life insurance quote today.