Life insurance is a contract between an insurance company and an insurance holder for death benefits to beneficiaries if the insurance holder dies. The benefits usually depend on the insurance holder's premiums. Beneficiaries can use the money for whatever they want.
The most common types are term and permanent insurance plans. Before buying a plan, you must decide which type you want.
Term insurance offers benefits for a particular period, usually between 10 and 30 years and is only available to people aged 85 and below. After the period ends, some companies allow you to renew it, but usually for higher premiums. Sometimes, you might get decreasing coverage after renewing the plan, so be certain to ask your insurance company.
Since the insurance offers protection for a certain period and you're not paying for cash value insurance, it is the most affordable. It is also the most suitable if you seek protection against a particular life situation. For example, you can use it during your working years to ensure your beneficiaries have an alternative income source. You can also take it to cover your mortgage years or if you have another large debt.
Another benefit of this insurance type is that you can change it to permanent insurance depending on your insurance company. This saves you the money to renew it annually or apply for a new policy.
Permanent insurance, also known as whole insurance, on the other hand, covers you for the rest of your life. This is a good choice if you want to build cash value. However, if you don't utilize the cash value, your beneficiaries will still receive a set cash value from the insurance company after you pass away. You can also take universal, variable, credit, mortgage, or supplemental insurance plans.
Another thing to consider when looking for insurance is the insurance company's reputation. Look online for reviews and ratings on different platforms and search them on the Better Business Bureau (BBB). It would help to consider how long they have been in business, their permits, and licenses, etc.
Cost is another important factor to consider. Term insurance is generally cheaper than permeant insurance, but make certain that you shop around and compare different companies.
One thing that affects the price of an insurance plan is your age. The younger you are when applying, the cheaper it will be because you have a lower death risk.
Another important factor is health. Most insurance companies conduct medical exams evaluating your past and recent health condition. If you have any chronic illnesses or illnesses that require regular maintenance, you will pay more for the policy.
You will also pay more if you have a dangerous lifestyle, like participating in dangerous sports and hobbies, drinking alcohol, smoking, or having a criminal record. Since females have a higher life expectancy than men, they usually pay less.