Like most other things, getting the best insurance deal does not necessarily mean that it will be the cheapest option. Sure, everyone likes to get a good deal and occasionally you may come across a bargain but most of the time, when it comes to life insurance, those deals are few and far between. A cheap or bargain policy usually has so many strings attached that it seldom is the best option in the long run. To understand how to find the best policy, it is helpful to look at the different types of insurance and what makes some type of policies cheaper than others. Then when offered a cheap policy, you can evaluate the offer objectively and establish if it is really the best insurance policy for you.
What's the Cheapest Form of Life Insurance?
The most affordable type of life insurance will be a term policy. In this type of policy, you pay the premiums and get the benefits of the life insurance for a set term. Most often, this type of insurance policy is taken out by homeowners when they acquire a mortgage. The insurance policy is there to ensure that if you die before the mortgage has been fully repaid, the policy will cover the costs of the outstanding mortgage. This will ensure that your dependents still have a home and are not burdened with the mortgage costs if you pass away. Sometimes there will be periods in your life when you have greater financial responsibilities. For example, if you have children in school and it is expected that they will attend college. You may want to take out a term life insurance policy for that particular time in your life to ensure that all your financial responsibilities can be met in the event of your death.
The reason why term insurance is cheaper is that at the end of the term, the benefits lapse. In other words, if you take a term policy for 20 years and at the end of that period you are still alive and well, you do not retain any benefits of the policy, including the money you have invested into it. Sometimes you can renew the policy by paying minor penalties which is better than losing out on the money invested. However, keep in mind that life insurance is about providing for your dependents in the event of your death and should not really be viewed as an investment policy.
Deciding on Your Insurance Needs
Before you can consider the different types of life insurance policies, you need to first establish what your insurance needs are. Think about what life stage you are in, what your financial responsibilities are and what dependents you have. As a single young person, few of these will be applicable to you. However, if you are married and plan to have a family then you will need to consider your insurance options. Even if your spouse is working, you may rely on both your incomes to meet your current lifestyle. If something happens to one of you, you will need adequate life insurance so that you or your surviving spouse can be all right financially. Insurance is particularly important if you are the main breadwinner in the family. Even though it is the more expensive option, it is sometimes worthwhile to look into whole life insurance policies as well as term life insurance policies. Because no one knows when their life will end, you need to look at all the alternatives available. Later in life, your spouse may be even more financially dependent on you as they may stop working or fall ill. In the event of your death, this would mean that they would be unable to support themselves and the payment from a insurance policy could well prove essential.
Deciding on What Type of Life Insurance Policy You Can Afford
It is also important to establish what you can afford in terms of insurance premiums. Naturally, the larger the amount paid into the policy, the greater the benefits paid out to your dependents. When considering this, be careful about thinking about the payout in today's terms. Keep in mind that inflation has a strong influence on lifestyle and the cost of living. Even if inflation is low percentage-wise, it still adds up considerably over time. Ensure that any term or whole life policy that you take out provides sufficient benefits to your dependents well into the future.