Life insurance is a financial asset that can benefit policyholders in a variety of different ways. With a quality life insurance policy, you can attain the sort of financial security you have been looking for.
But in order for you to be able to reap the benefits of a life insurance policy, you are going to first need to qualify. Though many people can qualify for some type of life insurance policy, there are still a number of factors that can directly influence your eligibility and your monthly premiums.
Your health, lifestyle, and age directly influence your ability to qualify for life insurance.
When an individual first decides to apply for life insurance, the insurance provider is looking for clues as to our mortality or life expectancy.
- How many more years am I expected to live?
- Are there any risky behaviors that I regularly engage in?
- What is my current financial situation; do I have the ability to pay for the policy? What are my future financial needs?
If you are a smoker, have certain chronic diseases, regularly pilot a private aircraft, you will most likely end up paying higher monthly premiums. Based on long-term statistical analysis, life insurance companies have concluded certain actions increase your likelihood to live a shorter life than would be expected.
It is important to note that your original monthly premiums are not necessarily the premiums you will be paying for the entire time you are a policy holder. If you are able to quit smoking, for example, you can provide the insurance company with the proof to re-assess your risk classification and adjust your monthly premiums downward.
Be actively thinking about the kind of policy you might need.
The phrase “life insurance” can be used to describe a fairly wide range of assets. The kind of policy you will qualify for—and the monthly premiums you will end up paying—can vary tremendously between individuals.
Assuming you will be able to qualify for life insurance, you are going to want to begin thinking about how much life insurance will be the right amount.
- How many people are currently financially dependent on your income?
- What are your long-term financial goals? How much life insurance is “enough”?
- What are the opportunity costs of purchasing a life insurance policy?
Once you can begin to have an honest conversation with yourself, finding the life insurance policy that is right for you becomes quite a bit easier.
Do some comparison shopping and consider all options you have available.
Because most life insurance companies would likely want you as a client to some degree, you actually have a lot of power as a consumer.
Life insurance is something that is considered a relatively safe investment. But just because one company seems to be good, that doesn’t necessarily mean they are the best for your specific needs. Some companies are more lenient about an insurance applicant’s height/weight ratio for instance, than another. Comparison-shopping allows you to find better rates and also feel more confident in your investment.
The first thing to think about when comparing life insurance companies is the ratio of costs to benefits. Everyone’s financial situation is different, and because of this, their ideal cost to benefit ratio is likely to be different as well.
The ‘cost’ of a policy is typically pretty straightforward—it comes in the form of a monthly premium. But the potential benefits of a life insurance policy are usually a little bit more complex.
- Does this policy enable me to build equity over time?
- Is this policy something that is adaptable? Convertible?
- Are there any ways that this policy can benefit me in my lifetime?
Each of these nuanced details of your life insurance policy are going to directly affect its overall value. The more benefits you want your policy to have, the more you will have to pay each month in monthly premiums. Those are the differences between term life insurance vs whole life (cash value) insurance. Though most life insurance policies are still considered to be a relatively safe investment, identifying the unique sources of value in the policy can really make a difference.
Generally speaking, the younger and healthier you are, the lower your life insurance premiums will be. It is logical due to longevity tables. But many people usually wait until they’re a bit older, get married and have a family because that’s when they feel they need life insurance coverage. It’s worth the time to proactively research and get educated about different policies because you will be better equipped to be a conscious consumer.