What are my insurance options?
There is no rule that says you can only own an individual life insurance. Owning more than one insurance, each with a different term, is called laddering or layering.
In fact, if you have several goals that you want to cover with life insurance, it may be more budget-friendly to buy more than one.
»Learn more: Charging multiple life insurance policies
For example, say your biggest debt is your mortgage. The loan balance is $ 250,000 and it has a term of 15 years. Given this, you probably only need a 15-year policy, right?
Well, let’s also say that you have three children aged nine months, two years and three years. You and your spouse plan to pay for their college education. Your youngest will not graduate at least 21years old.
So let’s think about this. You know you want protection of at least $ 250,000 for 15 years (the mortgage). And according to Education Data InitiativeThe average cost of a public four-year in-state college in the United States is $ 35,331 per student per year (including tuition, books, supplies, and daily living expenses).
Sending three children to college to get their bachelor’s degree will cost about $ 450,000 in total. You want this amount of protection for at least 20 years because your youngest is less than a year old.
You can buy insurance with a coverage amount of 700,000 USD and a term of 25 years OR you can buy two insurances – one with an insurance amount of 250,000 USD and a term of 15 years and another with an insurance amount of 450,000 USD and a term. at 25 years.
Think of the screenshots below. They are quotes for a 40-year-old man.
Option 1: Insurance – $ 700,000 life insurance with a 25-year term
Option 2: Charge two insurances – $ 250,000 life insurance with a 15-year term and $ 450,000 life insurance with a 25-year term
As you can see from the screenshots, you would save a few dollars each month by stepping up the two policies. And after 15 years, you really save money every month.
Option 1: Pay $ 55.81 per month for 25 years.
Option 2: Pay $ 51.60 per month for 15 years, then $ 38.66 per month for the remaining 10 years.
If you went with option 2 to step up the insurance, after 15 years, the first insurance would expire and you would no longer pay for coverage that you do not need because your mortgage is now repaid. But you would still have a 25-year security policy to financially protect your family for another 10 years.
How much insurance do I need?
When you buy a life insurance, you must decide how long it should be valid and how much coverage you should buy. The answer to how much insurance you need depends on your vision of your family’s future. Your long-term goals may change over time.
It is still wise to answer some important questions about your family’s current and planned expenses when deciding how much insurance to buy. Here are some questions to help you get started.
What are my fixed monthly household expenses?
These may include:
- Payment of mortgage or rent
- Loan payments (as student loans at a fixed interest rate)
- Health insurance premiums
- Vehicle insurance premiums
- Car payments
- Membership fees (training clubs, etc)
- Children’s school fees and expenses
How much are my variable household costs?
These will include:
- Credit card debt
- Average transport costs (vehicle fuel, public transport card)
- Clothes and temporary purchases
In addition to the above, there may be some non-recurring (or rare) large expenses that may be part of your short- or long-term financial plan. These may include:
- Renovating your home
- Buy a new or second home
- Buying a new vehicle
- Contribute to a pension fund
- Create a fund for a child or other family member
- Starts a new deal
Sure, you do not need to have exact amounts for all of the articles above, but it is good to have some sounding boards in mind when thinking about how much insurance coverage you will need to secure your family’s future.
Another important factor when buying a time insurance policy is your current budget.
How much life insurance can you afford?
Life insurance is ideal for most individuals as it can be customized to fit most budgets. For example, if you want a 30-year insurance policy with a coverage amount of $ 750,000, but do not think you can afford to keep up with the premiums in the long run, consider a smaller coverage amount or a shorter term instead.
Consider the options below. The offer is for a male applicant who is 40 years old.
Option 1: $ 750,000 life insurance with a 30-year period
Option 2: $ 750,000 life insurance with a 20-year period
Option 3: $ 500,000 life insurance with a 30-year period
If you want to reduce your premium costs, which option do you choose? Reduce the coverage amount or shorten the term? The right option really depends on your situation.
For example, if your mortgage has a term of 15 years and your children are over 10 years old, it is a logical choice to choose the 20-year period over a 30-year term. On the other end of the spectrum, if your kids still have diapers, it’s probably the wiser choice to lower the coverage amount and stick to the 30-year period.
Buy what you can afford. Some life insurance policies are better than no life insurance policy at all.
What happens if I need more life insurance?
At the end of your semester, the insurance ends and your payments to the insurance company will be completed. If you survive your lifetime insurance, the money you have deposited stays with the insurance company.
But if your coverage soon ends and you realize you need coverage to continue, you have a few options. You can renew the contract, convert it into a permanent insurance, or you can choose to buy a new insurance if you are still insurable.
Read more about your options here: What happens if I do not die while my life insurance is in force?
Will I qualify for an affordable life insurance policy?
The success of your application and the amount you will pay in premiums depends on a number of factors. These include:
- Employment (if you are in a dangerous professionlike working in the construction industry, your premiums will be higher)
- Personal and family history (if you have survived a catastrophic illness, or have a family history of serious illness, you can pay more in premiums)
- Current health
- Smoke status
- Driving status (a record of consistently unsafe driving will affect your premiums)
- Hobbies (if you love scuba diving or something else risky hobbiesexpect an increased premium)
- Frequent international travel – such as for work or volunteer work that involves traveling to areas listed as potentially dangerous by the State Department – is likely to make your premiums higher than average.
Do not let the list above scare you. Insurance companies need this information to calculate an estimate of yours risk of mortality, but do not hesitate to apply because you have some warnings against you. Quotacy works with all types of applicants who may face challenges in finding affordable quotes on life insurance.
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