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3 things to consider before buying life insurance

3 things to consider before buying life insurance

Life insurance is an essential tool to protect yourself against financial uncertainty. It offers more security compared to other investment avenues such as your savings, fixed deposits (FDs), and other reserves. Since there are various types of life insurance plans offered by different companies, it will be beneficial to understand why life insurance is significant and know some factors to consider before buying one in order to simplify your decision-making process.

Benefits of life insurance

Acts as an additional source of income
Your hard-earned income is often spent on responsibilities such as housing bills, clothes, car maintenance, insurance premiums, healthcare, food, and other needs. Your salary mainly covers such expenses, so in your absence or after your retirement, your family may lose the source of income to meet these needs. Returns from a life insurance policy act as this all-important source of income during such times.

Helps repay pending loan installments
Your family can use the money received from the life insurance policy to repay any outstanding installments of home loans, car loans, education loans, or other due amounts.

Secures the financial future of your children
Your life insurance policy returns, essentially, are several years’ worth of your savings stored safely to cover the cost of higher education for your children. The money will help pay their fees and other educational expenses until they find financial stability and independence.

Factors to consider before buying life insurance

Determine whether you need life insurance
Despite how beneficial it is, not everyone will need life insurance. You can consider purchasing a life insurance policy if you have not maintained enough liquidity provisions (property, cash, investments, or other sellable items) to leave behind for your family. A life insurance policy compensates for this and ensures your family has enough financial resources to sustain their lifestyle. If you have enough savings and arranged financial provisions for your family for such times too, you may not need life insurance.

Estimate how much coverage you need
It is easier to underestimate how much life insurance you need. Most insurance buyers may only think about paying off their major debts, such as educational loans or mortgages, using insurance returns. They may not consider how much would be needed to pay their monthly bills, children’s education fees, and other long-term expenses with inflation added to the equation. So, it is important to purchase an insurance policy with a death benefit worth ten or more times the current annual income of the policyholder. Moreover, it is essential to assess your current situation and financial goals before adding that number to the equation. Consulting a financial planner— a feature most insurance companies today provide— will help decide the insurance coverage accurately.

Compare life insurance plans and companies to get the best rates
Insurance companies offer different types of policies, such as term life insurance, variable life insurance, whole life insurance, universal life insurance, burial insurance, and other plans. They advertise their rates or offer free quotes online, making it easy to compare multiple quotes depending on the type of policy. Additionally, you can consult an independent insurance agent who can guide you in finding the best plan with the right premium.

Some popular life insurance providers to choose from include Haven Life, AIG, Ladder Life, Bestow, Lincoln Financial, and New York Life.