Here are seven things that should be considered when taking out a life insurance policy.



1. Do you have dependents at the time that you apply for insurance protection?

If you have children who will need financial care should something happen to you, you will need to consider their financial needs. Things such as school funding and general financial concerns should be considered, and a good insurance policy should cover these things at a minimum.

2. How much do you owe?

When considering life insurance, you should think about just how much debt you will be leaving behind. If you don't have enough life insurance coverage, that debt could be left for your family to pay. Can you afford that?

3. What should a life insurance policy cover?

Typically, a good life insurance policy should leave your dependents with enough money to pay for your funeral expenses, any debt that you should leave behind, as well as whatever your mortgage balance would be. That way, your policy would pay out your existing mortgage, and should leave your family with money to live on, especially if you're the breadwinner of the household.

4. Who will be the beneficiary of this policy?

The beneficiary is the person to whom the money will go once the policy is paid out. It is the person whose name will go on the “pay to the order of” line on the insurance company check. For example, because my children are underage, I made my mother the beneficiary of my insurance policy. Because she lives with my children and I, should something happen to me, my children will be financially taken care of, and they won't have to leave their home.

5. What kind of life insurance protection do you need?

Do you need a temporary insurance for something like mortgage coverage, or in cases where you're lucky enough to have your home already paid for, you might merely want enough coverage to keep your family from having to pay things like your debts, funeral expenses out of their own pockets. In this case, you might consider a more permanent insurance policy.

6. How old are you at the time that you apply for the policy?

The younger you are when you make the decision to get life insurance, the better off you'll be both in terms of the range of policies that are available to you, and the choice of premium options.

If you're older, life insurance will either be more difficult for you to get, or your premiums (monthly payments) will be sky high. So make the decision as early as you can.

7. Mortgage coverage

Consider the length of your mortgage when getting life insurance to cover that particular investment. If your mortgage term is say, 25 years, then common sense would say that you should probably get a term policy to cover that expense for it's duration. Many people over insure, getting a permanent policy to cover a 25 year mortgage. They will be paying those insurance premiums long after it is necessary.

I have a friend who is in her mid 30's, has no children, and no real family to speak of. She has minimum insurance through her job, but was recently concerned as to whether or not she should get more life insurance.

This is a case in which additional life insurance is not necessary. My friend is not married, has no children, and has adequate coverage for what she does have, through her work. Why spend the extra money for additional life insurance? Who was she planning to leave that money to? I told her not to bother.

As I said before, discussions about life insurance are most often extremely boring, but when you think about the possibilities, it's not boring at all.

You never know...

Thanks for reading.

Eva Nichols

Copyright 2006 Eva Nichols All Rights Reserved.