Starter's guide to buying life insurance

Life insurance is the kind of service you will probably purchase just once so it's very important to make the right decision when purchasing a policy. The things you choose when buying life insurance will affect the price of the policy as well as the amount of benefits it will offer and the situations that will trigger coverage. And the range of prices can go from affordable to really expensive. So in order to purchase a policy that will best suit your insurance needs here are some things to consider when shopping around for life insurance:

Amount of coverage

The amount of coverage you will choose to include into your policy will directly affect your rates. The more coverage – the costlier is the policy. So it's really important to set the amount right. There's no general rule on how much coverage to get. A good starting point is taking your annual income and multiplying it by the number of years you think it will be necessary to replace your income to the family. For some people it may take only a year while for others 10 and even more. It all depends on your family's financial situation and sources of income you have.

Type of policy

There are generally three types of life insurance policies to choose from: whole, term and universal. Whole life insurance isn't limited by any term and has a 100% payout rate. It's more expensive but it also has some cash value accumulating features that can be used as a guarantee for financial operations such as investments or loans. Term life insurance on the other hand is the least expensive type. It involves a set period of time after which the policy is terminated or can be prolonged. Term life insurance only pays out if the policyholder dies during the set period. Universal life insurance is a mix between term and whole life insurance. It has a set term but also involves a special savings account that accumulates cash value during the term. So you'll have to think well and by the type of policy that appeals to you the most.

When to purchase

Most people think that life insurance is only needed when you get old. And that's a very common mistake. The earlier you buy life insurance the less costly it will turn out because insurance providers assess the risk of insuring every customer and the risk is always lower for younger buyers than for older ones.