3 Simple Questions That Will Help Us To Choose The Right Life Insurance Plan

Choosing the right life insurance plan can be challenging and confusing - so many plans and terms to know.

Life insurance plans are insurances covering accidental death and disability when an individual dies or becomes disabled. There are many questions we need to ask ourselves before choosing our plan.

Today i covers 3 simple questions that will help us to choose the right life insurance plan.

1) Do you need life insurance for the entire life or just for a certain period?

Not everyone needs life insurance throughout their whole lifetime. Some people decide to have life insurance during specific periods in their lives. Whether we will need life insurance depends on our lifestyle, current financial status, retirement plan details, etc.

If we are going to retire soon and take no income from work, it may make sense to get some life insurance now instead of later.

If we have children who depend on us financially, it makes sense to buy life insurance as a part of our household budgeting. It also makes sense if we want to pay off student loans, car payments, mortgages, credit cards, etc.

In these cases, having life insurance could become advantageous to us. Buying life insurance only for a specific duration does not make much difference because life insurance premiums go up over time.

2) Do you intend to invest through your life insurance plan?

Investing in life insurance can provide us with more value than what we paid for it.

There are 2 types of investments are available through a life insurance policy: cash accumulation and growth investing.

Cash accumulation means the money goes into the policy itself. Growth investing involves using our policy as collateral against borrowing funds (or lending funds). Typically, these policies offer higher investment returns while being less costly than regular annuities. For example, they can allow us to borrow against our future payout streams to fund retirement in addition to the cash accumulation feature.

3) How much life insurance coverage is appropriate for your family?

How much insurance should we carry? We don't want to save any extra money for our kids' college tuition nor burden our family members with unnecessary debt by paying too much. To determine the amount of life insurance policy we need, draw a graph where each line represents our monthly household expenses.

On the X-axis, list different amounts of premium costs. On the Y-axis, list different values of the death benefit, at which point it starts making economic sense to purchase another policy. Draw a vertical line between the two points closest to your situation.

Life insurance is an important decision that affects your family. The above questions will give us enough information about various life insurance options to make the best possible choice for ourselves.

In Acorn Consulting Asia, we can help to choose the right one for our unique circumstances.