Life insurance might seem like an unnecessary expense, but having it can grant you peace of mind, especially if you have people depending on you financially. And while you might assume it costs a lot of money, that’s not always the case.
According to Business Insider, as of this fall, the average cost of life insurance is about $26 per month for a term life policy. Factors like age, health, policy provider and type, and gender all play a major role in the actual cost, though.
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If you’re thinking about getting life insurance, you’ll want to make sure you’re choosing the right policy for your family. GOBankingRates spoke with Adam Coarts, senior agent and owner of Goldfinch Financial Group in Des Moines, Iowa, about what to ask before choosing a policy.
Why Do I Need Life Insurance?
Before even checking out different policies, start with this simple question: Why do I need life insurance in the first place?
“Some of the more common reasons people consider life insurance is to cover final expenses or a large debt, such as a mortgage or loan,” Coarts said. “In the event something happens, they want these paid off and do not want [the] burden of these expenses and debts left to loved ones.”
But there are other reasons getting life insurance might make sense. According to Coarts, these include replacing your household’s income, paying taxes, helping to plan for a special needs situation, leaving behind a legacy for kids and grandkids, and leaving money to charity.
You might have other or different reasons for getting a policy, so take the time to consider your household’s needs and whether it’s right for you.
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How Long Do I Need Coverage?
The next question Coarts suggested asking yourself is this: How long do I need the coverage for? Think about whether the coverage will be for life or until a certain event happens, like paying off your mortgage.
“The answer to this question typically points to what type of coverage to begin shopping. As people age, their ‘need’ for life insurance changes,” Coarts said. “When someone is single and just starting their work life, their need is much different than a married couple with children and a mortgage.”
Keep in mind that your coverage needs can change based on your current situation, so you might not want to have the same option forever.
“I recommend doing life insurance needs reviews every few years to ensure you are properly covered as you age and your needs change,” Coarts said.
What Type of Life Insurance Should I Have?
Now you should ask yourself this question: What type of life insurance should I have? There’s more than one option, each with its own purpose, coverage and other key features.
“Term and permanent life insurance are the two main types, and they each have their place,” Coarts explained. “Term polices offer coverage and protection for a specific period, while permanent insurance, such as whole life to universal life, cover the insured until death no matter when death occurs. Permanent coverage is typically more expensive than term coverage.”
How Will I Pay for Coverage?
Once you’ve decided that you want life insurance and what type you want, it’s time to consider costs. Here are three questions Coarts suggested asking yourself.
- How do I intend to pay for coverage?
- Am I looking for flexible or consistent payments?
- How long am I okay with paying premiums?
“Paying for life insurance during retirement may not be ideal for everyone,” Coarts said. “Term policy premiums end at the end of the term, while permanent policies have options of cash value growth that can help a policy become paid up, or flexible premium options that allow you to customize a premium strategy that can adapt with income and retirement plans.”
How’s My Health?
Last but not least, ask yourself the following: How’s my health, and are my parents still around?
“This may be the most important question of them all. Money doesn’t buy life insurance, your health does,” Coarts said. “The answers to these questions will point you in the right direction. Some carriers are more lenient than others when it comes to health underwriting.”
When it comes to life insurance, there’s no one-size-fits-all solution.
According to Coarts, working with an independent broker or agent is a good idea, as it lets you shop around for different policies until you find the best fit for you.
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: 5 Questions To Ask To Determine What Life Insurance Is Right for You
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