If you have anyone besides yourself relying on your paycheck, you owe it to them to purchase life insurance. At a minimum, if you have a spouse or dependents who would be financially devastated if you were to die prematurely, or if you expect to be financially supporting your parents as they grow older, you need to make sure they are taken care of.
How much life insurance do I need?
Enough to replace most of your income for your family. This generally means ten to twenty times annual income, for people in their 30s and 40s. In today’s low interest rate environment, err on the high side – provided you can afford the premiums.
How long a term should I get?
It depends. You can lock in a level term for as little as one year at a time or as long as twenty or even thirty years at some companies. The longer the term, the higher the monthly premium. If you choose a very short-term policy, though, ensure it is guaranteed renewable (see below).
What features should I look for?
1.) An agent who listens. The agent should listen more than he or she should talk, and take your needs seriously. They should ask questions about your financial situation, your goals and your budget before recommending a policy.
2.) A solid company. Look for ratings of A or better from all major ratings agencies. It is very rare, but insurance companies do fail occasionally. You need your company to be solid and stable and able to pay a claim decades from now. Strength matters. You can look up current ratings here.
3.) Guaranteed renewability. As discussed, this is a guarantee from the insurance company that you will have the option to continue coverage at the end of your term, albeit at a higher premium. The last thing you want is to be diagnosed with cancer in the tenth year of a ten-year term policy and not be able to renew your life insurance, just when your family needs it most!!!
4.) Guaranteed convertibility. This is a guarantee that you may upgrade all or a portion of your policy to a permanent policy – such as a whole life or universal life policy, regardless of your health. Permanent policies can have much higher premiums than term, but they are designed to pay out even if you live to be over 100.
5.) Disability waiver of premium. This is a guarantee from the insurance company that if you become disabled for whatever reason, the company will waive your premium payments for as long as you are disabled.
Don’t forget the stay-at-home spouse!
Many people elect not to cover the non-working spouse. But if that person should die with young children in the home, the surviving spouse may want to take off a significant time away from work – in some cases a year or more – to help the children adjust. Life insurance can help you do that.
A final word
Remember – term life insurance is designed for a temporary need – to protect your family and loved ones for a specific period of time. Term life is the most affordable way to get protection in place, in the short run. In the long run, however, term insurance gets expensive. Few term policies ever pay out a claim. This is why guaranteed convertibility is so important – because the best kind of life insurance isn’t always term and it isn’t always permanent; it is simply the kind that is in place when you die. You can always have a look at what is life insurance uk online giving you a fair insight on your insurance related doubts.
