Shopping for a life insurance plan means choosing the right type based on your needs. But first of all, you need to know exactly what a life insurance plan entails. Very simply put, it is a contract or a policy between two sides. The first side is you, and the second one is the insurer or policy holder (insurance company). The contract stipulates that you will pay certain monthly premiums. The insurer, after your death, provides death benefits. These death benefits can cover expenses such as funeral costs and other types of bills, so as to not leave a financial burden to your family.

Shopping for the Best Plan for You

What amount in monthly premiums are you willing to pay for the luxury of having peace of mind? Most insurance companies evaluate you to determine your monthly rates by factoring in your age, gender and lifestyle as insurability predictors. Always be honest with your insurance representative about factors that you believe you could be penalized for, such as smoking, being overweight, etc. Insurance companies will typically find out this information anyway. Giving false or misleading information could cause your premiums to increase or your policy to be cancelled. Usually women pay lower premiums because they have a longer life expectancy. In any case, you will be shopping around to look for the best options out there, taking note to choose a company with a good track record. In 2016, the top three insurance companies in the USA were: 1. American General – AIG, 2. American National Insurance Company – ANICO and 3. Banner Life.

Coverage Amount

Determine the exact amount of coverage or money your family will receive as a death benefit. There are online calculators that can help you easily figure that out. Choose wisely and find a plan that you can afford. Keep in mind that life insurance is intended to cover your funeral expenses and keep your family financially stable by replacing the income that you would have produced. It is not intended to push your family into a higher tax bracket. Another easy way to figure out how much coverage you’ll need is by multiplying your annual salary by 8. The average amount you will pay monthly in premiums is hard to determine because of the differences in individuals. For example, if you are a female in her 30s and a nonsmoker, you’ll probably pay around $60 for one million dollars of insurance on a 20 year term. In contrast, a male smoker in his 50s would likely pay a bit more than $100 for half a million worth of insurance.

Advisors

If you are still uncertain or don’t feel prepared to purchase a life insurance contract by yourself, you can always seek professional guidance through a financial advisor or insurance expert. Many of them are used to working with new policy holders and can easily provide help in determining what plan best fits your life situation. It is also beneficial to consult with an independent financial advisor instead of a brand specific advisor since they consider multiple insurance companies, which can help you find better rates.

What life insurance plan do you have? What are some of the benefits it provides?

Staff (63 Posts)