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This is a guest article by Life Insurance Quotes, UK
Do you feel as though you need a PhD in Economics to understand how to choose the right life insurance for you? Get in line. Life insurance was once an easy purchase to make, and the options you had were very simple and straightforward. Now, there are thousands of different kinds of plans, and the sheer number of options is simply mind boggling. Make sure you understand the basics of life insurance before you select a plan so you don’t find yourself buying blind.
Term vs. Whole Life Insurance
The first step to understanding life insurance involves grasping the difference between term and whole life insurance. Term life insurance is essentially an insurance product that you buy to cover yourself for a limited, defined period. The length of time varies based on your needs and the conditions of the policy. The term you choose could be as little as one year, but most term life policies last somewhere between 10 and 30 years.
On the other hand, whole life insurance is a life insurance policy that stays active throughout a person’s entire (hence, “whole”) life. In most cases, policyholders must pay their premiums for a whole life plan every year to keep the policy active. When you have a whole life insurance policy, it remains in effect until you reach a very old age if your policy specifies it. If not, the policy stays in effect until you die.
There are many other kinds of life insurance plans available if you are looking for more than just a death benefit. For example, a variable life insurance plan provides a death benefit, but it also offers a fund on the side that operates much like an investment account. There are other varieties of life insurance as well, but for the sake of sticking to the basics, term and whole life are the most important types you should understand.
Analyzing Your Life Insurance Needs
When you are deciding which life insurance product is right for you, the first step is to analyze your needs. This essentially means figuring out what the economic needs of your dependents will be once you have passed away. You should consider your current financial situation, and use it as a gauge to determine the standard of living you desire for your dependents after you’re gone. In addition, you should factor in any outstanding bills that you would leave behind, as well as any funeral costs your death would incur. When you are figuring up how much life insurance you should buy, imagine the amount your family would need if you died immediately. This is the best way to determine what your current life insurance needs are before you buy.
You should evaluate your life insurance policy periodically as well. Life changes quickly, and life events such as the loss of a job, divorce, the birth of a child, marriage, or even a major purchase such as a new home can all dramatically impact the amount of life insurance coverage you need. Many experts agree that re-evaluating your coverage at least once every five years – or whenever you experience one of these major life events – is the best rule of thumb. As you get older, you need for life insurance should decline significantly due to less people depending on you for financial support.
About the Author: This article was provided by Life Insurance Quotes– A comprehensive guide to some of the largest and most well-respected life insurance providers in the UK.
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