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3 factors to consider before you buy life insurance

·3 min read
There are a series of items to consider when choosing a life insurance policy. / Credit: Nicolas Hansen/Getty Images
There are a series of items to consider when choosing a life insurance policy. / Credit: Nicolas Hansen/Getty Images

Life insurance provides financial security by issuing a lump sum of money to beneficiaries following the death of the policyholder. This is particularly important for those who have lost the reliable income of the deceased.

Even if money isn't tight, the added peace of mind that life insurance provides is beneficial and worth pursuing. If you're currently in the market for life insurance, or just want to increase the coverage you already have, now is a good time to do so. You can start by getting a quote today.

But just because the decision to enroll in life insurance is a no-brainer, it doesn't mean that the process is simple. In fact, there are multiple considerations to account for. As you review your life insurance options, ask yourself the following questions to better determine the policy and coverage you need.

How much life insurance you need

Probably the most important consideration when it comes to life insurance is the amount you need. Unfortunately, there is no clear answer to this question. How much life insurance you need is specific to your individual personal financial situation and circumstances. The way to determine a figure is largely tied to the answers to these questions:

Are you the sole income earner? What are your long-term plans? How healthy and old are you?How much debt do you have? What standard of living are you and your family used to?

By honestly answering those questions, you'll be able to come to a more accurate figure. You can also browse life insurance company sites to see what they're offering and what may fit your needs.

How much you should pay for life insurance

Equally as important as the coverage amount is the cost of the life insurance policy you want. But the price - like the coverage amount - is tied to a variety of factors. This includes, but is not limited to, your age, health, income and ability to pay. Cheap life insurance isn't always the best route to take, but it's better than nothing.

Still, there are reliable ways to get the best and most affordable policy:

Start early. The older you are, the more likely you are to have health issues, making your policy a more expensive one to insure.Comparison shop among companies. This seems obvious but can get overlooked when provided a seemingly cheap initial quote. Shop and compare rates and policies among providers to get the best plan for you and your loved ones. You can explore your options right now. There are multiple providers to choose from.The type of life insurance you should get

This is one of the trickier questions to answer. There are many types of life insurance to consider (although you may not be eligible for each). The most well-known are whole and term life insurance.

Whole life insurance tends to be more expensive because it remains active for the full life duration of the insured. There is no policy expiration date. Consequently, premiums are relatively high.

Term life insurance is cheaper but is limited to a select term or time frame of your life. It will need to be renewed. Terms can be 15, 20, 30 years or some other agreed-upon time frame.

If you're younger (think below 50) term life insurance probably makes more financial sense. If you're older, whole may be better. But that's a simplification. It's really tied to your own circumstances and preferences. It's easiest to speak to a provider who can answer your questions and help point you in the right direction.

As mentioned, life insurance is a smart financial move. But be careful how you proceed. You don't want to buy a policy you can't afford but you also don't want to leave those who rely on you in a precarious position because your coverage was lacking.

There are more life insurance considerations to account for so do your research. An online financial adviser can also help ensure you make the right choice.