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5 Guidelines to Choose the Right Type of Life Insurance

Though there are many reasons that would lead you to buy life insurance, the end goal is always the same—taking care of your family. Now, despite the slow growth in 2020, there has been a gradual uptake of life insurance with a 5% market growth in 5 years.

However, the array of policies available today—though necessary and beneficial for the growth of the industry, more often than not, the insured is left overwhelmed. Because the daunting task of evaluating each policy is to pick the one with the prerequisite riders that make a life insurance cover beneficial for you and your family.

We’ll demystify different life insurance policies and through that, you’ll get a clear set of guidelines that will prompt you to opt for one against the other.

Types Of Insurance Policy

The policies are generally classified into two main types; permanent and term life insurance. The policies are;

  • Term life insurance – These policies are set with an expiry date in mind. It could be one

up to 30 years.

  • Universal – This policy offers you the opportunity to adjust your benefits and premium 

payments.

  • Whole life – With this policy you get paid when you die.

  • Group life – As the name suggests, this policy is offered benefits to a particular 

group of people.

  • Simplified issue – This policy doesn’t require you to take a medical exam.

  • Variable – This form of policy ties your premium amount to investment accounts, like: 

mutual funds or bonds.

  • Guaranteed issue – This insurance policy also doesn’t require you to take any medical 

exam and its coverage amounts are also low.

  • Final/Burial expense – Though not having a huge death benefit, this policy allows the 

beneficiaries to utilise the funds, however, they see fit. 

  • Level term – The premium value of this policy is capped at the same amount every year.

  • Return of premium – This policy allows you to get your money back when the term 

expires and also you pay a flat rate throughout your policy.

  • Increasing term – Also referred as annual renewable term, the premium of this policy 

increases as you get older.

  • Permanent – Having this policy guarantees that you’re insured for your entire life, not 

unless you surrender the policy or stop making premium payments.

  • Single premium – Instead of making monthly, yearly or quarterly payment this policy 

allows the insured to pay the full amount upfront.

5 Guidelines To Choose The Right Insurance Policy 

Given the aspects of each policy, here are key guidelines to help you evaluate the ideal life insurance policy to go buy.

  1. Your needs

The insurance policy you opt to buy should be proportional to the needs or goals you hope to achieve in a given time frame. Do you want your debts to be covered upon your demise? Or are you aiming to cater for your kids’ college fees? 

  1. Age

The age of the policyholder is factored in most life insurance covers; your options get limited as you age. It’s therefore advisable to start early by choosing the lowest premium with an adjustment option when and if your situation changes.

  1. Budget

Though there’s a gradual uptake in life insurance and an overall warm reception of the same, 48% of American citizens do not have an insurance policy. The majority of which cite affordability as the key concern for shrugging off buying life insurance policy.

  1. Health

Health is one of the reasons you’d opt to buy life insurance, which makes it a critical aspect in ascertaining the rates at which you’d pay your premium and the cover limit. Insurers cluster policy buyers into four distinct health categories; Standard, standard plus, preferred and preferred plus. This classifies the health risk each segment is prone to.

  1. Duration

Your goals should dictate the duration at which you’d want your policy to last, in conjunction with your age. For instance, in term insurance, if you don’t die within the length of your policy, you or your family will get nothing in return.

Having clear goals and assessing your financial and health situation will give you a breakdown on the ideal life insurance policy to buy. 

Reference;

Facts + Statistics: Life insurance | III

Facts + Statistics: Life insurance | III (2021). Available at: https://www.iii.org/fact-statistic/facts-statistics-life-insurance (Accessed: 10 August 2021).

Nationwide Life Insurance Review

Nationwide Life Insurance Review (2020). Available at: https://physiciansthrive.com/nationwide-life-insurance/ (Accessed: 10 August 2021).

Life insurance ownership in the U.S. 2021 | Statista

Life insurance ownership in the U.S. 2021 | Statista (2021). Available at: https://www.statista.com/statistics/455614/life-insurance-ownership-usa/ (Accessed: 10 August 2021).

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