How to Choose Life Insurance

Choosing life insurance is not a bed of roses. It is like purchasing a parachute: no one wants to imagine needing it, but having one is a lot better than not having one when the plane starts to sputter. The issue here is that it is quite common to feel like you are drowning in jargon due to the multitude of options and the fine print.

How to choose a life insurance plan that works and won’t leave you pulling your hair out or breaking the bank? I’ve got you covered with a step-by-step rundown that’s less “insurance salesman pitch” and more “friend who’s been there.” Let’s figure this out together.

Why Bother Getting This Right?

Life insurance is not just a tick on your adulting to-do list—it is a life jacket for those you hold dear. In the 2023 survey done by LIMRA, 54% of Americans reported having life insurance. However, many are either underinsured or are utterly clueless. Get a plan that is not optimal and your family will be left drowning in bills. Get the right one and you make the hero move leaving them with a secured future. So whether it is guaranteeing your children do not live on ramen forever or covering the mortgage, being prudent is essential. Grab a coffee and let’s dig in.

Step 1: Understand What You Are Risking

What is the goal here? Other than the obvious “we all die someday” point. Do consider who is relying on you. Do you have a spouse who relies on your paycheck? Kids who require education and braces later? Or perhaps a mountain of debt which you do not wish to leave behind for your family? Write it down.

For myself with a toddler at 32 years old I certainly realized – I want to set aside a sum sufficient for maintaining my lifestyle for 20 years in case I’m not around. Your ‘why’ determines the entire context.

Step 2: Need to Die Insurance Menu

Okay, now we’re getting to the interesting part, or at least less dull part. You can get term and permanent life insurance. Think of term life insurance as renting a car; you pay little, you’re protected for a specific duration (30 or 10 years) and when the time is done, it’s done.

For healthy folks in their thirties, it starts at $20 a month. Now that’s life? That’s like buying the car. Unlike term, it’s yours for life, but it’ll cost you a car payment or two every month. Instead, it gives you an added bonus. After some time, term life insurance can even add a cash value to your policy.

I personally would choose term life insurance, because it is affordable and gets the job done. But if you are looking to leave behind a legacy, then whole life is what you should be looking for. Knowing this is half the battle in how to choose life insurance.

Step 3: Estimate the Coverage Amounts

Not having enough coverage is like preparing a squirt gun for a wildfire. Not To mention, having too much can lead to wasting money. According to the older people, using 10 to 15 times your salary is a good rule of thumb. In this case where you earn 60,000 dollars, you should aim for 600,000 to 900,000 dollars. But let’s be honest with ourselves.

Family Paycheck Lifesaver: How long will you family be dependent on you? Assuming you earn 60,000 and work for 15 years, it comes out to 900,000 dollars.

Bills and Other Expenses: Let’s say that there is 200,000 dollars mortgage and 12,000 dollars average for a good funeral.

Goals: Maybe 50,000 dollars can go towards junior’s college fund.

The final results are sort of a mess and I don’t think I will ever use it. I do speak with a friend who works in finance, and he talks to me about it. You have to stay with what you’re comfortable with without making it difficult for yourself to afford meals.

Step 4: Find Out Quotes Like A Bargain Hunter

Life insurance quotes are astonishing and more often than not, so out of hand. Take a 40year old non smoker, putting his plan at 500,000 does leave him with 40 dollars a month to spend, whereas a 55year old is burdened with a 100. What works for me?

Look out for websites such as Policygenius since they collect quotes faster than I can say, “premium”. Check with the insurer’s rep too because the AM Best ratings will tell you whether they will actually pay out or not. And don’t forget about the riders – little things like accident coverage can add value to your policy without raising costs significantly.

Step 5: Reveal Secrets About Your Health (In a way)

So, the thing is, insurers can be very inquisitive. They will prod on your health as though it is a child with a stick. A bulk of them would want a constant check-up along with blood and urine tests unless you choose a no-exam plan which raises the cost significantly.

What if you smoke? Easy! Your rates simply double. Do you have diabetes or a slight daredevil attitude (like me with my weekend skydiving)? Certainly pack a cost. I stopped smoking a year before applying once – saved me a lot. You should be as honest as possible. Get fitter if you can, and see those premiums drop fast.

Step 6: Choose a Company With a Reputation to Be Trusted With Your Pet

The policy is as important as the insurer. MetLife and Prudential may be major players, but smaller businesses often have more competitive offers. It is important to look for reviews. I personally use Trustpilot to see how quickly the company processes claims. There is nothing worse than your spouse fighting for money while in soggy grief.

Local providers can shine as well: type “life insurance near me” and see who you find. A good provider is like a dependable babysitter: you just know she’ll take care of the children.

Step 7: Make Sure You Review and Sign the Dotted Line

No matter what, take a closer look at the contract before signing anything. Is the coverage that was promised actually something your will materialize? Are premiums adjustable or set in stone? Do they have some strange factors that prevent payout, such as bungee deaths not counting?

I once saw an error with how long the term was set for. It almost did, so I’m glad I checked. Don’t be afraid to ask silly things if you absolutely must; it is your money, after all. Overjoyed? Sign it, put a reminder on your phone for payments, and feel good for a moment. You have finally taken responsibility.

Screw-Up’s You’ll Want To Skip

Even experts trip up. Do not leave your family hanging by not being fully prepared. Don’t make the mistake of grabbing a 10-year term policy if you have kids that will need a 20. For the sake of everything, check permanent life policies. Those can sneak up on you. Just pause and collect your thoughts, and you’ll be alright.

Let Me Conclude: Not A Challenging Task

Being able to choose life insurance policies is not as complicated as it seems—it’s just a matter of knowing what you need, deciding the type, how big or small you want it, and finally where to buy. The truth is, 41% of us are underinsured (yep, 2023 stats again), and you are clearly on top of that statistic. Get a quote and have a clearer mind the next day. How will you choose life insurance? It’s really up to you, but I hope I created a better illustration for you.