How to Choose the Right Life Insurance

Life insurance is a like a gift; one that you leave to the most important people in your world — your family and loved ones, or even a cause or charity that you care about deeply. That’s why knowing how to choose the best life insurance matters so much: The coverage you buy today will protect the people you love long after you are gone and continue to extend your legacy. And it’s more than a death benefit — depending on the coverage you choose, your life insurance could protect you while you are still living and be a vital part of your retirement plan.  

With so many coverage options, how do you choose the right life insurance policy for you? There are many life insurance types, which means you can find the one that works best for your needs. Here are some of the most common considerations people use when choosing a policy, and what you should think about as you’re making this decision. And remember, you can learn more about life insurance anytime by reaching out to a Farm Bureau agent.

Do I Really Need Life Insurance?

Every situation is different, but there’s a good chance that you need life insurance. Do you have dependents? Are you responsible for the primary care of your loved ones? Then you should have a policy to provide for their futures if needed. If your family depends on you, you can protect them with life insurance that will provide financial security after you are gone.

That’s not the only circumstance under which life insurance is important, though. You should also consider purchasing a policy if you have outstanding debts (like a mortgage) that would become the responsibility of a co-signer or spouse if you passed away. If you own and operate a business, life insurance could provide an immediate cash payout, which would assist while transitioning business accounts. Furthermore, some life insurance can be helpful while you are still alive since you can borrow against the value of certain policies. 

In addition, many people also consider leaving a portion of their life insurance to a favorite cause or charity. So, life insurance can be instrumental in providing financial support to the things most important to you and your family.

How Much Life Insurance Do I Need?

Many factors contribute to how much life insurance is appropriate for you and your family. Consider how many dependents you have, what their future education expenses might be, how much outstanding debt you have and your current lifestyle when you’re making this decision.

In general, many people look to buy a policy that is worth five to ten times their annual salary. Consulting with an insurance agent can help you ensure you have the right level of coverage for the needs of your family. You may also find our life insurance calculator helpful.

Types of Life Insurance Policies

There are several types of life insurance, each with some unique characteristics. Knowing what makes them different will help as you decide on the best option for you. 

Term life insurance is generally the most affordable life insurance option. As the name implies, the insurance is good for a specific period (usually 10, 20 or 30 years). A term life policy does not gain cash value and cannot be used as an asset. Many term life options have an option to convert to a permanent policy. 

Increasing term life insurance is a type of term policy that gives you the ability to obtain coverage now, but also secure more coverage in the future. With increasing term, you’ll be allowed to increase coverage up to double the face value of your policy over the first five years without having to go through the underwriting process again.

Whole life insurance, also known as permanent insurance, offers lifetime coverage that does not expire and builds cash value over time. Many whole life policies will allow the insured to borrow against the cash value of the policy during the life of the policy. Additionally, the death benefit is guaranteed, and premiums remain steady.

Universal life insurance is a form of permanent insurance that generally offers greater flexibility than whole life policies. With a universal life policy, you are covered for life and can adjust things like premium payments and death benefits (with certain limits) to meet your needs. Your policy accumulates value based on the premiums you make. You can borrow against this value and benefit from it while you are still alive.

How to Choose the Right Policy

With so many options, choosing the right life insurance policy can be confusing. Though nothing can replace advice from a trusted financial professional, we’ve compiled some common considerations.

You should consider term life insurance if:

• You need a short-term solution and need insurance for a specific time period. For example, if you have young children and want to ensure they will be able to afford their education if you pass away, a term policy might be the ideal solution for your family.
• You have a limited budget but need coverage. Term insurance is generally the most affordable form of life insurance, but still provides excellent coverage benefits if something happens during the policy term limit.
• You would like to lock in your insurability while you are young. Many term policies include an option to convert to a permanent life policy without additional medical examinations when the coverage term nears its end. Life insurance is often less expensive and easier to get when you are younger, and often healthier, so a term policy can be a good way to begin with life insurance.

Consider permanent life insurance if:

• You need insurance for as long as you live. Because coverage remains steady over time, whole life policies allow the security of knowing you are covered.
• You want to invest in a product that grows and matures over time. Because you can build equity with permanent life policies, they can be considered an asset.

With so many options available, choosing the right insurance policy can be confusing. As you examine your options, be sure to consult with a trusted agent that can clarify the details of each type of policy and help you choose your best option based on your own personal situation. 

Choose the Right Policy for You

If you’re ready to make a decision about life insurance, reach out to Farm Bureau for the help you need to find the best option for you.