Most of us don’t think about life insurance very often. Usually, we get to the point of thinking maybe we should get some, and maybe we even go to get a life insurance quote online only to be confused by all of the different types of life insurance and associated terms. So before you get bogged down in the mass of websites, quotes, and information out there, here’s what you really need to know about life insurance and online quotes.
Types of Life Insurance
There are two basic types of life insurance: term and permanent. Term life insurance functions like most other insurances. You pay a premium and if the event you bought insurance against happens (in this case your death) the insurance company pays money to the beneficiary. That’s insurance plain and simple. Term life insurance does just that for a certain period of time or term. If you are still alive when the term is up, you may have the option to renew you insurance (probably at a higher premium), convert it to a permanent life insurance policy, or you may have to reapply all over again and take the chance of coverage being denied. This will be stated somewhere in the fine print when you get the policy so you have some control over what your options at the end will be.
Permanent life insurance is a different type of insurance. These policies cover you for life as long as the premium is paid up. They also have a tax deferred savings account attached that you can borrow from (and reduce the final payout) or trade in your policy for. The big advantage of permanent life insurance is that it doesn’t expire and helps you save money. The big drawback is that it costs significantly more than a term life policy.
How Much Insurance Should You Get?
Before getting a quote it’s also a good idea to determine what level of benefit you need. Why pay for a $1,000,000 benefit if $100,000 would be enough? Determining the amount of benefit will depend on what you want your life insurance to accomplish in the event of your death. Insurance agents may try to get you to buy a large enough benefit to cover every conceivable expense including paying off the mortgage and putting the children through college. A more moderate view is to get a large enough benefit that your family will suffer no immediate financial hardship or stress when you die. Usually a sum of about 10 times your annual income will be sufficient for this purpose. Think of this process as the trade off process necessary in any major purchase be it a computer or a video surveillance system. There’s the top of the line, state of the art, latest and greatest model, then there’s what you actually need and can afford. Don’t bankrupt yourself to protect your family’s future, but don’t skimp on the coverage you need either.