Life insurance means different things to different people. When it’s time to select a policy, the first step you should take is to think about your goals. Figure out why you need life insurance. Do you simply want coverage for when you die’ Do you want to replace your income’ Many people want life insurance in order to establish a fund for big life expenses, such as college, retirement or to cover outstanding debts if they die or become disabled. You need to think about what you want life insurance to accomplish for you before you can decide what kind of policy is best for you.
Second, you need to thoroughly examine your budget. Make sure you can afford life insurance. Figure out how much you can spend on premiums. Term life insurance tends to be cheaper. Those with temporary needs like a mortgage and child rearing expenses may find term insurance to fit their needs from both a goals and financial perspective. Others find that a permanent, whole life policy fits their needs, while others opt for a combination of term and whole life insurance policies. Whatever life insurance coverage you decide upon, make sure it fits into your budget as well. A qualified life insurance provider can discuss options with you.
Third, don’t forget to calculate your earning power, especially if you need life insurance for income replacement. Most of us assume a three percent annual raise when estimating earning power, and most of us retire when we are 65 years old. However, select the scenario that best suits you and your lifestyle when calculating your future earning power. You want to make sure you are realistic in this calculation so you can accurately select the life insurance product that best suits your needs.
Finally, consider what stage you are in life. It may be that all you need is a death benefit. But if you have people dependent on you for their income, you may need to leave them a great deal more. If you have dependents, make sure your income is replaced in the event of your death or incapacity. And if you need more money for your retirement than your social security checks and pension will provide, consider whole life as an investment tool.
Take a long, hard look at your goals, at your budget, and at your real earning power. Consider where you are in your life and what you want to accomplish in the years ahead. When you have clear goals in mind, then you can choose the life insurance coverage that is best for you.
Tom Martens is the content syndication coordinator at Lifeinsurance-Southafrica.co.za South Arica?s leading Life Insurance and Life Cover portal.
