Life insurance can help make it easier for your loved ones to deal with a difficult situation. Many people expect the process of buying life insurance to be confusing and time-consuming, and the coverage to be expensive. But what if it was simple?
Research shows that perceived cost is the top barrier to purchase life insurance. However, only a quarter of people, when asked, could correctly estimated the true cost of a term life insurance policy. Year after year, consumers greatly overestimate the cost of life insurance1, but because coverage amounts are flexible, there's almost certain to be an amount that can fit your budget.
Once you realize that life insurance doesn't have to break your budget, educate yourself on the two different methods of shopping for life insurance so you can get financial protection for your family should the worst occur.
First, determine your family's needs
Your family's financial situation is unique, so you'll want to carefully determine your needs. Life insurance calculators can help determine how much life insurance coverage you should apply for, taking into account your marital status, age, whether you have children, and other considerations.
Shop by coverage amount
The traditional way to buy life insurance is to calculate how much money will your family need if you were no longer around to take care of them, and then buy enough coverage to cover those expenses.
Standard policies can have a wide range of coverage amounts. Consider how much your loved ones would need for funeral costs, mortgage payments, childcare, college tuition, and other expenses.
But after those calculations, you may discover you need a large amount of life insurance coverage — and, depending on your financial situation, that coverage amount may not fit in the budget.
See what fits your budget
While you want to make sure your loved ones are taken care of if something should happen to you, you also may not be able to find as much room in your budget for as much coverage as you need.
Instead of giving up, consider shopping for how much your coverage your budget can accommodate.
Most term life insurance quoting tools will clearly show you the premium amount and how often you pay, so you know exactly how much coverage will cost each month, or on an annual basis. Some tools will also allow you to start with how much you want to pay, and then show you how much coverage that will buy.
Think of a number that works for your budget, and see just how far that can go.
Making life insurance more affordable
There are a number of ways you can make life insurance protection even friendlier to your budget, including the product you're considering.
Term life insurance tends to be a more affordable option than permanent life insurance. It provides coverage for a specific length of time, such as 10, 15, 20, 25, or 30 years. If you should pass away during this coverage period, the death benefit proceeds will go to your beneficiaries.
Once the term has expired, your coverage ends. Some options are to renew the term policy (at a higher premium), convert it to permanent protection before it expires, or get a new term life policy.
The bottom line
Whether you shop by budget or by coverage amount, remember that some coverage is better than no coverage — so do what you can afford. And don't forget to see what your employer offers as part of your benefits package, which may be enough to meet your needs or be a great supplement to other coverage you have.