The premium you pay each month for the insurance policy goes up as the amount of coverage increases. Calculating your insurance needs is a key step in the process. A policy with a low payout may leave your loved ones without enough money.
Buying a higher policy than necessary means you’ll pay more in premiums while the policy is in force. A general calculation is to purchase eight times your salary. Consider factors like your debt, monthly financial obligations, spouse’s income and whether or not you have children. A financial planner is able to give you a customized recommendation if you aren’t certain on the amount you need.
Consider Term Lengths
When you take out the policy, you lock in the premium rates for the length of the insurance policy. Term policies vary from 10 to 30 years. Your personal financial situation helps you select the term length. If you are young or have young children, a longer policy provides your family with greater protection for a longer period of time. If you are nearing retirement, you usually don’t need as long of a policy. Consider how your family’s financial situation will change at the end of the term. For example, if you are eight years away from retirement, a 10 year policy may be enough. Remember that your rates will be higher if you decide you need another policy at the end of the term because you will be older.
Get Healthy
Your health status affects the rates you receive on a term life insurance policy. A person who is physically fit receives better rates on the premiums than someone who is overweight, smokes or has health problems. A medical professional completes a physical before the policy is issued, which usually takes place either in your place of work or home. The exam usually includes your weight, height, pulse and blood pressure. The physical may also include blood and urine samples. Taking care of yourself or working on improving your health if you know you are getting a life insurance policy may help you get lower rates.
Research the Company
The financial stability of the life insurance company is a factor when taking out a policy. Research the company’s stability to increase the chances of choosing one that will stay in business for the entire term of the policy. Several agencies rate the financial stability of insurance companies, including Moody’s, A.M. Best and Standard & Poor’s. Avoid companies who don’t score well on these rating services to protect your investment in the life insurance policy.
Revisit Your Policy Details
Life changes affect your finances and may mean the need for changes to your term life insurance. A policy you bought right after getting married might not offer enough coverage once you have children. Likewise, if you never have children or create a large retirement cushion, a term life insurance policy may no longer be necessary at all. Look at your coverages and financial situation periodically to determine if any changes need to be made.