These Are the Important Things That You Really Need to Know About Life Insurance
People keep telling you to get Life Insurance but you’re not convinced just yet. There are still a few things you need to know before you apply for a policy.
Understandably, most people don’t like to think about their mortality.
We know that we will all eventually pass away. However, the thought of that happening is often so upsetting that we push it to the backs of our minds. And for many, the concept of death only hits them when it becomes a reality.
The simple fact is that anything can happen in life. And as unpleasant as it may be, you have to think about the possibility of a future that doesn’t have you in it.
How will your family cope without you around?
Can they survive financially without your income?
What can you do to protect them?
Getting Life Insurance is one of the best answers to that last question. However, you may not understand exactly what that entails. After all, if you try to avoid thinking about death, it’s unlikely that you’ve researched Life Insurance.
In this article, we aim to answer the key question…
What do you need to know about Life Insurance?
These are the things to keep in mind when you’re comparing quotes from different providers.
Item #1 – It’s Not Just for Older People
The idea that Life Insurance can wait until you get older is a huge misconception. However, there is a strange logic behind it. Death hopefully won’t be an issue for you for many years yet. Because of that, you tell yourself that you’ll just cross that bridge when you finally come to it.
Many people take the same approach with their retirements.
If it’s not affecting you right now, you can easily put it to the back of your mind.
However, this line of thinking doesn’t account for the fact that the unexpected can happen. Somebody who’s as fit as a fiddle could still pass away due to an unforeseen accident.
Life Insurance is for anybody who wants to provide financial protection for their loved ones. That includes young and healthy people.
Item #2 – It’s About Managing Risk
Some people see Life Insurance as a form of investment. They believe they’re essentially paying into themselves for the prospect of a return later on, should they pass away. Some policies even offer direct tax benefits that further this viewpoint.
However, we don’t consider Life Insurance an investment.
Instead, it’s a form of risk management. It’s a way for you to protect those you love if the worst-case scenario comes to pass. That’s because a good policy ensures your loved ones won’t struggle financially if they lose you.
Item #3 – The DIME Technique Can Help You Work Out How Much You Need
One of the key challenges you face comes from figuring out how much Life Insurance you need. It’s possible to under-insure yourself, which could lead to your beneficiaries not receiving as much as they should. It’s also possible to over-insure, which leads to you paying more for your policy.
Use the DIME technique to prevent either scenario from happening.
This technique covers the four key numbers you must consider when choosing a policy:
Start by ensuring you cover the income that your loved one will lose out on if you pass away. From there, add on the debts you may leave behind and your mortgage. Finally, consider how much the cost of further education for your children may be. Add all of the numbers together and you have the minimum amount that your policy should cover.
Item #4 – You Can Change Your Policy If Your Circumstances Change
Some people have the misconception that a Life Insurance policy stays the same for life.
This isn’t the case at all. In fact, it’s good policy management to make changes based on your circumstances.
For example, you may take out a policy today having just started a new job. In ten years, you may have received several promotions and raises. If you don’t change your policy to reflect those increases in pay, you have less cover than you need for your new income.
Any major life event can trigger you to update your policy. Such events include getting married, having children, and even changing jobs. The assumption that a policy should remain static may lead to you becoming under-insured.
Item #5 – It Doesn’t Have to Be Expensive
You may look at Life Insurance as an unneeded expense in your life. Worse yet, some quotes may reinforce this opinion. If an insurer provides a quote that covers everything under the sun, you may wonder if it’s worth the price.
But Life Insurance doesn’t have to cost an enormous amount of money.
The specific cost of your policy will depend on various factors. These include your physical health, age, and the type of policy you choose.
The key is that you don’t assume that Life Insurance just “costs too much”.
Item #6 – It’s Worth Naming Several Beneficiaries
You’ll likely have a specific beneficiary in mind when creating your policy. This is the person who will receive the money from the policy upon your passing. Good examples are your partner or your child.
However, it’s wise to name several beneficiaries on the policy, rather than just one.
It’s possible that your chosen beneficiary will pass away before you do. If that happens and you don’t have another beneficiary, your policy will pay out to your estate upon your passing. This increases the time needed for your family to receive the money, which could create issues.
Item #7 – Get Several Quotes
As with any long-term financial commitment, it’s recommended that you obtain several quotes for Life Insurance. This allows you to compare offerings and prices as objectively as possible.
Just note that the cheapest policy is not always the best option. Check what the policy covers before signing. You may find that a few extra dollars provide a more comprehensive level of cover.
Do You Have Any Questions?
The above covers some of the key facts about Life Insurance that you need to know before you apply. Hopefully, this means you have a better understanding of what Life Insurance is and why it’s important.
But you may have more questions.
That’s where NobleOak comes in. We’re happy to discuss your Life Insurance questions with you at any time. Our goal is to ensure you’re as informed as possible about your policy and what it covers. Get in touch today if you have any questions.
And that leads us to the final question we’ll ask in this article:
To insure or not to insure?
That is a question that only you can answer, perhaps with the help of some professional advice. This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.