What's an easy and effective step you could take toward protecting your family's financial future? Buying life insurance. Identifying the right life insurance strategy could help you accomplish different financial goals, depending on the policy you choose.
No matter your financial goals, life stage or lifestyle, life insurance could be an important part of your financial plan. The following steps could help you explore your life insurance options and understand the ins and outs of the research process.
Step 1: Examine Life Insurance Options
It's important to understand the different types of life insurance policies available, as well as the add-ons that could apply to each. That's because different policy types could suit different life stages and variables, and your life insurance needs might also adjust as your life changes. If you're married with young children and have a mortgage, your life insurance needs may differ from those of a divorced woman in her early 50s or a married couple living in retirement.
There are other variables to consider as well. For example, think about your current finances and budget. Are you expecting your life insurance policy to generate savings for retirement? Would you like to leave behind an inheritance for your loved ones? A life insurance policy could cover a set period in your life (such as 10, 15, 20 or 30 years, known as term life insurance), or it could cover you for the rest of your life (known as whole life insurance or universal life insurance).
Step 2: Consider Your Coverage
Consider taking into account both short-term expenses and long-term financial needs when determining the size of your life insurance policy. Some immediate expenses may include paying for your funeral and burial expenses.
Long-term financial needs could be things like replacing your salary for those who rely on your income. These expenses may even include services you provide for your family, which they would need to pay someone else to do, such as financial management or even lawn care and home repairs.
Long-term financial needs may also include paying off your mortgage and saving money for your children to go to college. If you're buying a life insurance policy to create an inheritance or for charitable contributions, you'll also want to determine the dollar amount you desire. A life insurance professional could help you get life insurance and calculate your needs, while also taking into account the all-important variable of inflation.
Step 3: Be an Informed Consumer
If you've never had life insurance before — or you're looking to switch from one type of policy to another — you may have no idea what a policy costs. More specifically, it is important to understand the costs versus the value. The value is the comprehensive outlook of the costs and benefits for the type of policy that is right for you.
To see the potential costs of specific policy types and sizes depending on your age and other variables, consider using an online calculator to evaluate your life insurance needs and explore the combinations of prices, services and amenities.
Step 4: Check Financial Ratings
Consider purchasing a policy from a reputable and established life insurance company for further peace of mind. One way to determine this is by checking the financial ratings for the life insurance company.
When you buy a life insurance policy, you're buying a product meant to last anywhere from 10 years to the rest of your life. Assessing the financial strength of the life insurance company could be especially important for this reason.
Step 5: Speak to a Financial Representative
Speaking with a financial representative could be an important part of your journey. A professional could perform a personalized needs analysis, which is an assessment of your current financial standing. Learning more about where you are today could help you create an action plan for the future. It could be a great idea to check in with a financial representative at any time in your life — not just when you reach a major milestone.
A life insurance policy could be an important part of your plans for the future. Purchasing a policy doesn't have to be complicated — and with these five simple steps — you could be one step closer to securing a strong financial foundation for your loved ones. Once you've completed your research, you could learn more about the steps involved in purchasing a policy.