4 of the Most Important Factors When Shopping for Life Insurance

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  • Life insurance can help protect your family’s financial future. However, only 52% of American adults own some form of life insurance.
  • Ask yourself questions like how much insurance do you need and what type of insurance should you get to make shopping for life insurance easier.

Shopping for life insurance can be confusing, so here's what you should focus on.

There are many reasons to get life insurance. It is meant to help protect your family's financial future, replace lost income, and pay off debt and future expenses. According to the Life Insurance Marketing and Research Association (LIMRA), if the primary wage earner in America passed away unexpectedly, 42% of families would face financial hardship in six months.

Despite the importance of life insurance, only 52% of American adults own some form of life insurance coverage. Shopping for life insurance doesn’t have to be complicated. Here are four important factors to consider when shopping for life insurance.

Do I need life insurance?

Recently, 31% of Americans stated that the pandemic has made it more likely they will purchase life insurance within the next 12 months. You should consider life insurance if you are concerned about leaving your dependents in a difficult financial situation or burdening others with funeral expenses if you should die.

People who are single with no dependents and are financially independent may not need life insurance. Parents with young dependents, people who have a mortgage, and primary wage earners should consider life insurance. It is important to consider your financial situation and see if life insurance is beneficial for you and your family.

How much life insurance do I need?

Once you have determined that life insurance is a necessity, the next step is to determine how much to get. One rule of thumb is to multiply your annual income by 10 and add it to all debts. If someone has debts of $250,000 and a salary of $50,000 a year, using this rule of thumb means multiplying that salary by 10 to get $500,000, then adding the $250,000 in debts to get a $750,000 policy. This total amount is a good starting point to determine how much life insurance you need.

The current median life insurance coverage offered through work is only $20,000 or one year’s salary. With 22% of those insured believing they need more life insurance coverage, it is important to ensure that there is enough life insurance to protect family and loved ones.

What type of life insurance product should I get?

The two main types of life insurance are term and permanent, or whole life insurance. Term life insurance is the least costly, but only lasts a certain number of years. As long as the premium is paid, coverage continues until the end of the term, or until your spouse passes away. If you outlive a term policy, the policy expires, and no benefit is paid out.

Permanent life insurance, also known as whole life insurance, provides coverage for your entire lifespan. Permanent policies are more expensive than term policies, but offer more benefits. Besides lifetime coverage, they offer a cash value component. Whether you choose a term or permanent policy depends on your financial goals and needs.

What is the premium?

The main misconception when it comes to life insurance is that it is too expensive. According to LIMRA, more than half of Americans overestimate the cost of life insurance by three times. Life insurance premiums can be very affordable. The average cost of a $500,000 20-year term life insurance policy for a healthy, 30-year-old male is $25 a month and $21 for a healthy 30-year-old female.

The premium will depend on a variety of factors. The type of policy, the length for term policies, the death benefit amount, and the policyholder's health are some key factors that will determine the premium amounts. The younger you are, the cheaper premiums tend to be. People can customize policies so they obtain a policy that they can afford.

Due to the misconception about life insurance costs, many people needlessly put families in financial jeopardy. Shop around and compare quotes from different insurers to find the most competitive and affordable rates.


Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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