Tips for Choosing the Right Life Insurance Policy

Choosing the Right Life Insurance Policy

Before you purchase a life insurance policy, here are some questions to consider:

1. Who do you want to protect? Spouse, children, grandchildren — yourself? Purchasing a life insurance can be for several reasons, but who you want to protect and provide for will be your first consideration. And yes, sometimes life insurance protection is for you!
2. What does income replacement look like? Is your goal to replace one or multiple income streams? What’s the plan if one or more income streams disappears because you’re unable to work or die? When considering policies, make sure you’re looking at all the sources that bring in income/revenue to accurately account for income loss without financial hardship.
3. What’s your debt load? Calculate your debt load that will need to be resolved if you are unable to work or die and add that to the policy payout goal.
4. Don’t forget about the mortgage! Unfortunately, banks don’t care when the unexpected happens. Make sure you have a mortgage protection policy that pays part or all of the mortgage while your family has time to sort out the estate if you become ill or die.
5. Do you need a short-term solution to cover a gap or a comprehensive lifetime policy? Different types of life insurance policies serve different purposes and goals. Determining whether you need short-term or lifelong coverage will help you significantly focus your research period.

Additional Note:

We see this often with our customers, so we’re mentioning it as an additional note to consider when choosing the right life insurance policy that will meet your needs.

We’ve seen the tendency to rely on property, art, collectibles, investments to provide a stand-in “life insurance policy” for the family left behind after the passing of a loved one.

And here’s our note: Assets are great only if they are liquid. Any other investment (like property or family home, collectibles, art, etc.) are great only when their cash value is accessible from a sales transaction.  For example, take the housing market: We are seeing multiple red flag warnings across the board. Home prices keep falling, inventory is excessive, and on-the-market time is very high.

If your family home is the “life insurance policy” for loved ones, it can leave them with a financial hardship they are unable to manage. A home takes months to clear out, clean up, prepare for market. That’s just the pre-market prep! Then there is the actual time on the market, which can take months. Mortgage payments and property taxes are still due during this time making it a difficult challenge during a time of grieving.

Just make sure you’re asking the right questions and looking at all the numbers to make sure your policy protects you and your loved ones.