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How to Choose Life Insurance



Life insurance is a product that almost everyone should own, but many people do not. There are plenty of people who don't even want to think or discuss it because it is associated with death.

Steps


1.
Understand why people purchase life insurance coverage. People do this to protect debts (perhaps a mortgage), family costs or school fees (in the event of a parent passing away), to protect a business (against the loss of a vital partner), or as part of their overall estate planning. Virtually everyone in society with any family, assets or responsibilities needs some life insurance coverage.
2.
Learn the two basic types of insurance: term and permanent.
* Term insurance is temporary and only lasts for a predetermined predetermined 'term' at the outset. This may be for a short period of time for a specific purpose or potentially twenty or thirty years. If you pass away a few days after coverage has ended, there will be no payout.
* Permanent insurance will cost more up front, but is intended to last a lifetime ensuring that someone receives a benefit from the policy. There are different types of permanent insurance, whole life, universal life and variable universal life.
3.
Consult a professional advisor. They are knowledgeable in the different products available, and can help you determine what type of coverage you need for your particular situation. You might want to consider a broker, someone who works with a range of companies, rather than an advisor who deals with just one company. Brokers are independent and have a much broader market perspective.

Tips


In Canada, the death benefit payout from a life insurance policy is tax-free, whereas if the money were to flow through an estate it would be taxable. This makes a life insurance policy a valuable way to pass on an inheritance.

Warnings


Many people take the lowest cost option and purchase the bare minimum of cover. Look to be fully covered rather than just partially so.


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