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Questions to Ask When Choosing Your Life Insurance Policy


It's time to buy life insurance, but where do you start? You generally don't take classes in school on how to purchase life insurance or sit around chatting with your friends about the latest in life insurance news. However, making this purchase can be critical to the financial security of your loved ones, so it's important that you get it right. Below are several of the things you should be aware of before you pick your policy.


In general, the younger you are, the less you'll pay in premiums. However, there are a lot of variables. Term life insurance usually costs less than permanent. It's also more flexible, and you can buy it for a short period of time, such as 5, 10 or 20 years. Keep in mind that while the premium should stay the same for both types, if you renew a term policy, the premium might go up. While term can be the right choice if you are primarily concerned with protecting dependent children, there are some advantages to choosing permanent.

Option to Sell?

The reason permanent life insurance costs more is because the policy has value and can function as an investment. Furthermore, despite it being called permanent, you don't have to hang onto it until the end of your life. If you decide that you no longer need it, you can sell it through a life settlement. This allows you to essentially transfer the policy to another person. You can review a guide on life settlements and find out how to get maximum value out of your investment if you think this is an option that will be important to you.

How Much Do You Need?

Life insurance is not just about paying for your funeral and other expenses. It's also not just about leaving your family a lump sum if anything happens to you. You need to have enough insurance to protect your family at least until your children are adults. You may also want to make sure that there is enough money to pay for your children to go to college.

If you have a spouse who makes substantially less than you or who does not work outside the home at all, you may want to make sure that they are taken care of as well. Take the time to sit down and calculate exactly what your family would need to replace your income for as long as your children will be dependents or longer. When you eventually teach your kids about death, having the financial portion reconciled can provide them with peace of mind during a tricky conversation. 

Your Beneficiary?

It's important to name the right beneficiary on your policy. If you are married, that may be your spouse, but not necessarily. For example, if you have children from a previous marriage that you are primarily concerned about supporting, you may want to name them. However, if they are minors, they cannot directly receive payment. In this case, you could make the beneficiary whoever you have named as the children's guardian in your will, possibly your former spouse. Another option might be creating a trust. The trust itself could be named as the primary beneficiary.

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