What You Need to Know about Life Insurance

Getting cheap life insurance quotes is not difficult in today's competitive market, but you'll want to go into it armed with information to get the best deal on the right policy for you. Here is what you need to know about life insurance and about yourself when getting a quote.

Determine Your Dependents' Needs

To get an accurate quote on a policy, you'll first need to have a grasp on the magnitude of what the policy will be replacing. If you earn wages or a salary, you'll want your policy to be able to replace that in addition to any special needs, such as college tuition for your children or paying off your mortgage. Add up these needs, in addition to what you think your family would require annually. To give you an estimate of how high your policy should be, if you're making $50,000 per year and want to replace your income only (without allowing for any extra needs), you will need a $1,000,000 policy.

Decide What Kind of Policy is Right for You

There are four basic types of life insurance. Each one is explained below, so you can compare them, talk it over with your family and/or financial advisor, and decide which one is best for you.

• Term Life - This is the cheapest and simplest form of life insurance. Term life insurance protects you for a set period of time, usually from 10-30 years. If you die within the set term, benefits will be paid to your beneficiary. Unless you renew the policy, your insurance ends if you are still alive at the end of the specified term. This type of insurance is good for people who have a temporary need for life insurance or need a large amount of protection on a limited budget. The disadvantage is that, if you choose to renew, premiums increase as you get older and can become unaffordable.
• Whole Life - This type of policy carries a cash value in addition to offering life insurance protection. You pay a fixed amount in premiums for the duration of the policy. With time, this policy develops tax-deferred cash value that can pay dividends. Such dividends can be used for whatever you need-children's tuition or additional retirement income, for instance. The advantage of this policy is that your premiums never increase, but they are initially more expensive than term premiums would be.
• Universal Life - Universal policies add the flexibility of an account to your policy. In this account, your insurance company will invest part of your premium in things like mortgages or bonds. Upon your death, what your beneficiaries receive depends on the type of policy you have. In one type, you use the account to offset the cost of premiums, and your beneficiaries receive the face value amount of the policy. Alternatively, your beneficiaries could receive the face value in addition to the cash value accumulated by the account. The latter option will cost you more.
• Variable Life - Variable life is very similar to universal life, but it offers the policy holder more investment options for the supplemental account. For example, you might have your choice among mutual funds, stocks, or bonds in investing a portion of your premiums.

Getting the Best Deal

If you are on a budget but still want to protect your family, your best bet for cheap life insurance quotes will be on term life insurance, though good companies can offer competitive premiums on any type of insurance. Also remember that your premiums will largely hinge on your health, medical history, and lifestyle. So if you're looking to lower premiums, become a non-smoker if you're not already, manage your weight, and address any recurring health problems you might have.

Remember to Re-Evaluate Periodically

A life insurance policy is not something you deal with once and forget about. To ensure you have the best fit for your life circumstances, you'll want to re-evaluate your policy and coverage levels when you have life-changing events. Such events might include marriage, divorce, a new baby, death, or a child's graduation.

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