Factors To Consider When Choosing a Life Insurance Plan

Factors To Consider When Choosing a Life Insurance Plan

A life insurance policy gives you peace of mind knowing that your loved ones will be covered financially. By paying life insurance premiums, you can get a sense of security in case of your demise. Purchasing a life insurance policy is no easy feat. It requires research and planning, which includes comparing quotes from multiple insurance providers. 

Before getting a policy, you need to have a basic understanding of life insurance. With the wide variety of life insurance products out in the market, it’s common to feel overwhelmed. That’s why Local Retirement Group is here to guide you. Here are the key factors to consider when selecting the ideal life insurance plan for your portfolio.

1. Assess your financial situation

When it comes to life insurance, it requires some form of financial planning. The first and crucial step is to assess your current financial situation. This involves calculating your net worth, estimating your debt-to-income ratio, and determining your living expenses. 

Once you’ve calculated your monthly expenses, you’ll be able to choose a premium amount that you can easily manage. Keeping your finances in check helps you determine the right coverage for you. Moreover, this will prevent you from overpaying or underpaying your insurance premiums.

2. Buy life insurance early

Of these variables, your age is the biggest factor affecting your insurance premiums. On average, the premium amount increases by about 10% for every year you age. This is because insurance companies correlate young age with good health and fewer risks. Therefore, the insurance rates will go up as you get older. 

With that in mind, the best time to get life insurance is when you’re still young. Starting early means the less expensive your insurance policy will be. If you don’t want to pay higher annual premiums, it would be wise to start while you’re still young and healthy.

3. Get the right type of life insurance

Life insurance isn’t a one-size-fits-all option. There are different types of insurance products available on the market. The two most popular options are term life insurance and whole life insurance. 

Term life insurance is a type of policy that provides coverage for a certain period. It’s considered the simplest and purest form of life insurance with no savings or dividends component. If the policyholder dies during the term, a guaranteed cash benefit is paid to the beneficiaries. Term insurance is ideal for people who need coverage for a limited period of time.

On the other hand, whole life insurance typically covers you for as long as you live. This permanent life insurance coverage for your entire life. With whole life insurance, you can build cash value over time. Depending on your policy terms, you can withdraw your cash value and use it for loans and other purposes. It's a good option if you want to leave a legacy to your loved ones.

4. Determine the amount of coverage you need

Another key thing to consider is how much life insurance coverage you should have. When you have enough coverage, your insurance policy can help cover burial expenses or pay off remaining debts. In general, it’s a helpful financial tool to lessen the burden on your loved ones.

To calculate your ideal coverage amount, simply multiply your annual income by 10 and add your outstanding debts and other family expenses. For financial experts, your coverage should be at least 10 times your annual salary.

For example—if your annual salary is $50,000, you should opt for $500,000 in coverage. This rough estimate should be enough to cover all debts and financial obligations in the event of an untimely death. Determining reasonable coverage will help protect your family’s future.

The final decision will still depend on your individual needs and preferences. Consult with a financial advisor who can help you choose the most appropriate insurance policy.

Conclusion

When you’re ready to purchase life insurance, talk to a trusted insurance agent. If you are looking for a knowledgeable and reliable agent, you've come to the right place. Local Retirement Group can help you ensure financial security for your loved ones. Our insurance agency is here to offer various insurance options at a better value. We have your best interests in mind and will go that extra mile to guide you through the process. 

Call us today to learn more about our insurance products.