Buying Life Insurance for the First Time? You Should Consider 3 Factors

Buying Life Insurance for the First Time? You Should Consider 3 Factors

As COVID-19 has engulfed the world and has killed more than 358K people, securing the family's future has become a necessity now than ever. If you wanted to support your family, even after you're gone, buying life insurance is the ideal solution. Especially, during uncertain times like this, the importance of life insurance cannot be underestimated.

There are different types of life insurance products available in the market and you need to choose the right one. You cannot understand the intricacies of all the life insurance policies. But, there are a few key factors that you should consider before purchasing life insurance.

1. Cost factor

You can be confused about how life insurance premiums are calculated and what aspects of your application form could elevate or lower your insurance premium. Here's a list of 6 factors that will affect your premium.

• Age - The more your age is, the higher the premium
• Gender - The average life expectancy of women is higher than men. So, women policyholders pay a low premium.
• Health History - If you have a history of health conditions, you may have to pay a higher premium. Furthermore, the insurer will also check your weight, blood pressure, cholesterol levels, and other metrics that could indicate potential health issues.
• Occupation - If you are in a job that risks your life, for example, pilots, you will have to pay a higher premium.
• Policy Type - Policies issued for a higher amount of coverage for over longer terms have a higher premium.
• Smoking habit - If you're a smoker, you are considered more prone to fatal diseases, so you will need to pay 2 to 3 times higher premium.

2. Assess your insurance needs

One way to assess your need is through the "DIME (Debt, Income replacement, Mortality, Education)" method. Ask yourself the following questions when buying the insurance policy:

• How many are financially dependent on you?
• Do you want to replace your income for the rest of their lives?
• Is there anything else that your family can rely upon such as side income to repay the debts after you're gone?
• Do you want to back the education expenses of your dependents?

Answers to these questions will help you decide how much coverage you will need.

3. Compare policies

There are two types of life insurance plans - term insurance plans and permanent insurance plans. The term insurance plan is the most preferred. It is a large insurance cover, taken for a specific term, and you are required to pay a smaller premium.

Whereas, permanent insurance gives you a cover for your entire life. These plans cost more than the term insurance plans. Your choice should depend on your needs, both immediate and future.

When you consider the above-mentioned factors, you’ll know exactly which insurance plan is the best for you and your family.