Life Insurance Selector
- Last Updated: Monday, 01 March 2021
Unfortunately, buying life insurance is not that simple. The marketplace is filled with a number of choices including term, whole life, as well as universal life policies. In this article, users can walk through a series of questions that can help them choose an insurance policy that suits their planning timeframe, coverage needs, as well as their budget.
Choosing Life Insurance
Life insurance plays an important role in everyone's financial contingency plan. However, as a consumer, it's sometimes difficult to figure out what kind of life insurance to buy. It's a topic most people don't like to talk about, and insurance policies are normally a long-term commitment.
We've discussed the benefits of term versus permanent life insurance (such as whole and universal life) elsewhere on this website. With that information as a background, the following questions can help determine the best balance of coverage and features:
Question 1: How long do you think you will need life insurance coverage?
- Ten years or more. Go to Question 2
- Less than 10 years. Term Insurance is usually the right decision for a short-term investment.
Question 2: In addition to owning a life insurance policy over the next ten years, do any of the following features appeal to you?
- Premiums that never increase over the life of the policy.
- Lifelong, or permanent, life insurance.
- An insurance policy that allows you to accumulate a tax-deferred cash value, which can be withdrawn or borrowed against in an emergency.
- Yes. Go to Question 3
- No. Term Insurance is probably the right decision if all you're looking for in a policy is the coverage benefit.
Question 3: Does your household budget limit the amount of money you can allocate to life insurance, or do you have some flexibility built into your budget?
- No, I have budget flexibility to spend on life insurance. Go to Question 4
- Yes, my budget limits the amount of money I can spend on life insurance. Term Insurance is arguably the most efficient policy you can buy when it comes to maximizing coverage per dollar of premium paid.
Keep in mind that the primary reason for buying life insurance is for the financial protection it offers family members when answering this next question. This means one should never lower the amount of insurance coverage they're going to buy in order to gain some of the extra features mentioned above.
Question 4: Which of the following two statements best describes your present situation?
- I like the features of permanent life insurance, and I believe I can afford the higher premiums necessary to provide the coverage I need to protect my family. Go to Question 5
- I like the features of permanent life insurance, but the only way I can afford the coverage I need is by supplementing permanent insurance with another policy. A combination of Term Insurance and Permanent Insurance can help balance the desire for the advanced features of permanent insurance with the need to provide adequate coverage to protect a family.
Question 5: Which type of premiums appeal to you?
- Adjustable premiums, which allow me to pay more or less depending on my current financial situation. Go to Question 6
- Fixed premiums. Whole Life Insurance provides the features of permanent life, as well as the benefit of an accumulating cash value fund.
Question 6: Are you interested in a guaranteed death benefit and a fixed rate of interest, or are you willing to assume some higher level of investment risk in order to try to achieve a higher return?
- I prefer certainty when it comes to benefit and interest rate. Universal Life Insurance provides the flexibility of adjustable premiums, an accumulating cash value, in addition to the coverage benefit.
- I'm willing to assume some risk in an attempt to achieve higher returns. Variable Universal Life Insurance is perhaps the most flexible and feature-rich policy offered in the marketplace today; including the ability to achieve higher returns on investment.
Life Insurance Calculators
Once you've decided which type of life insurance is the right choice, you're also going to want to know the amount of coverage needed. To help with that decision, we have several online insurance calculators:
- Simple Life Insurance Calculator: takes a very basic approach to figuring out how much life insurance is needed. It's a good tool to use when looking for a "ballpark" estimate.
- Income-Based Life Insurance Calculator: evaluates the user's current life insurance policy against their income needs.
- Comprehensive Life Insurance Calculator: our most complex aid of this type, this calculator evaluates over 25 variables to determine how much life insurance the user might need.
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