Choosing the Best Life Insurance Policy

by Nancy

What are the most important things to consider when purchasing life insurance? Read about choosing the best life insurance policy for your needs in 2021.

Purchasing life insurance is a decision you make to assist and protect the people you love the most after you are gone.  Banks & credit unions frequently offer unsolicited life insurance policies at low premium rates, but do they have the type of coverage your family truly needs? Choosing the best life insurance policy means spending some time doing research and comparison-shopping to get the best rates. How does one choose the best life insurance plan in 2021? What are the most important things to consider when purchasing life insurance?

Life insurance payouts vary per policy. Payouts also vary based on how much money was paid into the plan and for what length of time. The most important aspect pursuant to purchasing life insurance is how much the policy protects your family financially. What are the best and most reliable life insurance companies in business today? Read ahead to discover helpful information about choosing the best life insurance policy for your needs in 2021.

Life Insurance

Life Insurance 101

Life insurance policies pay out death benefits to specified beneficiaries in the event of your natural, accidental, suicidal, or homicidal death. Does life insurance cover losses/expenses due to long-term illnesses? Critical illness cover, also referred to as critical illness insurance, is one type of life insurance policy with coverage for specific illnesses when conditions are met.

Life insurance is separated into two main categories, which are easy to understand on the surface. Both types entail detailed nuances and coverage terms, however, which require you to spend some time in careful study prior to making a purchase decision. Unlike many purchases today, most of the time you spend researching life insurance is not spent finding the most affordable rates. Online rate-comparison sites are common in modern times. Most insurance providers keep prices reasonable to attract your business away from numerous competitors.

Both main categories of life insurance also provide similar death benefit payouts to beneficiaries once a death is verified. Therefore, the research you do is much more applicable to policy term expiration and how it impacts those payouts. The two main categories of life insurance are:

  • Term life.
  • Whole life.

Term Life

Term life insurance policies are written with expiration limits. For example, term life insurance policy terms last for as little as one year or long as thirty years. Payouts are only valid and activated if the policyholder dies within the specified term. Payouts range from approximately $50,000 to multiple millions of dollars but if the policyholder is still alive at the end of term the entire policy expires and becomes null & void.

Various types of term life insurance policies are also available. Level-premium policies guarantee the cost of the premium remains the same for the entire life of the policy. You pay the same amount of premium in monthly or annual installments until you perish, or the policy expires.

Annually renewable policies are written with a one-year renewable term. Limits on how many consecutive times you are allowed to renew the policy are specified when you initially purchase the policy. Premiums increase each year the policy is renewed. Annually renewable policies are purchased when sudden high debt is introduced to your life and you need to cover your family short-term until the debt is satisfied.

Decreasing term policies are also commonly used for situations where the policyholder is in debt, albeit not necessary an emergency and/or sudden debt. For example, decreasing term polices are used to cover the cost of your mortgage. The coverage/payout in your decreasing term policy decreases each year in parallel to the decreasing balance on your home mortgage.

Whole Life

Different from term life policies, whole life insurance policies have no term expiration limits and many more types of policies to consider. A basic whole life policy guarantees how much its cash value increases over time. Universal life insurance offers flexible premium prices, which increase as the policyholder ages. Group life insurance policies are written as both whole and term policies but hold no cash value. Group policies are generally used to supplement your main life insurance plan.

Final expense polices are specialized variations of whole life policies, which cover funeral, burial and approved medical expenses after your death. Simplified issue and guaranteed issue are also specialized variations of whole life policies. Simplified issue polices are approved with minimum health examinations required, whereas guaranteed issue policies are guaranteed to be approved regardless of your condition. All specialized variations of whole life policies have no cash value and carry higher premium costs than normal life insurance policies.

Additional Considers Before Choosing a Life Insurance Plan

Critical illness policies might cover strokes, heart attacks, specified types of cancer and multiple sclerosis (MS). Expenses covered by critical illness and other types of life insurance policies include outstanding debts, grocery/monthly bills, and childcare. College tuition, household necessities and family medical expenses might also be covered depending on provisions written into your policy.

Choosing the best life insurance policy for you is largely dependent on your financial situation and the anticipated needs of your loved one(s) once you pass away. Some life insurance policies cost as little as $10-$15 per month. Premium and rate calculators are commonly available on insurance provider websites. This helps you know (and compare) what general prices to expect before talking to an agent or making a purchase. More specific price quotes are also available once you do contact an agent or begin a purchase process.

Choosing a life insurance plan also depends on the company/insurance provider. Transparent pricing, quality customer service and a strong reputation with consumers are all important aspects to consider. The best life insurance companies for 2021 include: