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A Beginner’s Guide to Life Insurance

With so many types of life insurance policies on the market, deciding on the plan that is most appropriate for your requirements and is the best value for money can be a bewildering task. Every potential life insured should ask the following questions to ensure they make the right choices.

Do you need life insurance?

Your personal situation will determine whether or not you need cover. If you have no dependents or do not generate a large proportion of your family’s overall income, you probably will not need to consider it. If your salary is important to your family’s financial future and the payment of education fees, mortgage and general bills then the right policy in place is important to ensure that these financial obligations continue to be met in the event of your death.

How much life insurance do you need?

There is no set rule for determining the amount of cover you require as the level depends on a number of factors such as sources of income, how many people are dependent on your salary, your debts, and your lifestyle. A general rule of thumb is between five and ten times your annual salary.

What type of policy should you buy?

Many insurance specialists recommend that those under the age of 40 and don’t have a family history of life threatening illnesses should arrange term insurance which offers benefit in the event of your death but no cash or surrender value. On the other hand, whole life insurance offers both a death benefit and cash value, but costs more.

How much does it cost?

Life insurance provided through a company’s employee benefits program is by far the least expensive available. These policies are usually term policies and employees are usually covered as long as you work for the company.

The cost of other types of life polices vary depending on the amount you buy, the type you choose, the practices of the specific insurance company, and the percentage commission the company pays its agents. The fundamental premiums are based on actuarial formulas that anticipate your life expectancy with individuals that represent a higher risk paying more. This can include smokers, those that are overweight or have a hazardous occupation or take part in dangerous pastimes such as mountaineering or flying.

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