Life insurance often carries a stigma. People are averse to it because they find the thought of anticipating one’s death very morbid. However, let’s be realistic, nobody lives forever and this is one thing that’s an absolute certainty. What we don’t know and cannot predict is when or where our time is up. Once that happens, who will be responsible for your family’s financial needs? Can you expect your savings to be sufficient enough to meet their long term needs years after you are gone? What if you are servicing a mortgage or have any other outstanding debts? Are you willing to leave them with this burden to shoulder? Try to give these questions some thought. I believe that as fiscally responsible individuals, we will come to the same conclusion that, for the sake of our loved ones, it’s better to prepare for the unexpected. A life insurance policy is a tool that can help us be prepared.
Now that we’ve decided that a life insurance is something worth considering, we need to find out how to obtain the cheapest rates without compromising the quality of benefits received.
Choose Life- Different Types of Insurance
There are generally three types of life insurance – the level term insurance, decreasing term insurance, and the whole-of-life insurance.
The level term insurance is based on a term that is set according to how long a customer wants to be covered, with a payout that is the same throughout the duration of the insurance’s term. This means that the premium payments will remain the same throughout the life of the insurance.
A decreasing term insurance has a payout that decreases over time during the duration of the insurance’s term. This is determined by the customer, usually based on the amount of debt that they are servicing, which generally reduces over time. This means that the premium payments for the decreasing term insurance will decrease as the amount of the coverage decreases.
Whole-of-life insurance has no specific term and has a fixed payout amount. In this case, as time passes, the premium amounts may change, and your beneficiaries may no longer require the same amount of financial coverage to maintain their standard of living.
Review your finances and consider your mortgage, debts, and your current monthly expenses to determine your total insurance need. Will this amount be fixed or will it decrease over the period of time you want covered? Will you want your coverage to last until your mortgage and debts are fully paid, or until your kids graduate from college? Do you want your beneficiaries to be covered for a fixed amount and for the rest of your life, despite expected changes in their financial circumstances?
If you find there is no need to cover your beneficiaries beyond a set term in the future, and that the amount of coverage is expected to decrease over time, you may want to seriously consider going for a decreasing term insurance. A decreasing term insurance will be your cheapest option.