If no one at all depends on you financially, you are free to forget all about life insurance. But everyone else should set aside the cultural distaste for talking about death and work toward finding an individual life insurance policy plan to provide for dependents after you're gone.
According to Forbes contributor and wealth advisor Tim Maurer, those depending on a replacement for your income might include a spouse and kids, sure, but also an ex-spouse, life partner, sibling, employee, employer or business partner.
"You don't have to become an expert before you buy life insurance, but it's important to be an informed consumer and know your options," noted the Vermont Department of Financial Regulation.
Within those options, which all fall loosely into the categories of either term or whole life insurance, here are four things to look for before settling on the best life insurance.
A policy that offers enough coverage: A few numbers to consider are the amount it will take to cover such expenses as your mortgage, personal or car loans, property taxes and so forth, recommended DFR. You may also want to include enough life insurance payout to cover your final expenses, and, if you're a parent, some of your children's future college tuition and other expenses.
But don't assume that life insurance will have to cover those expenses in their entirety, DFR added. It recommended also listing all the income sources and assets your family would have if you were gone starting tomorrow and using that to offset the total insurance benefit they would require. Also add the face value of any group life insurance you already qualify for. "Do not forget to include the ability of other members of your family to earn a living," DFR noted.
A policy you can afford: While you want enough life insurance, buying a policy you cannot afford is counterproductive since you're likely to lose it when you can't pay the premiums, noted DFR.
If you're straining to purchase enough insurance to give your dependents the financial support they would need if you died, term life insurance is for you, according to Kiplinger, which added, "Dollar for dollar, term gives you the most protection for your money. Period."
A company that will be around a long time: You want to be sure the company you purchase from will be around long enough to protect your loved ones after you die, DFR noted. Obtain information about a company's financial strength from your insurance agent or a commercial rating service that evaluates insurance companies' financial strength and ability to pay claims, like Moody's Investor Service.
A carrier who charges the least for your health issues and habits: Before you shop for individual life insurance, recognize that rates are based on life expectancy. There are some factors you can't do much about: young people get better rates, for example, and so do women, because they statistically have longer life expectancies. But with other individual risk profiles, different companies are more lenient with certain factors, according to Kiplinger. It advised consumers to shop around for the companies with the best requirements in these areas:
- Weight: Since obesity can cause or be related to other severe health conditions, insurers will consider your weight, Kiplinger noted. But the designated weight ranges for the best life insurance rates vary by company, so use an online quote site like AccuQuote or Insure.com to see who is most lenient if you have weight issues. Women should seek companies that use unisex weight tables, which ordinarily allow more weight for top rates.
- Family history: All life insurance providers will determine whether your close relatives have died or been diagnosed with life threatening and chronic illnesses. But according to Kiplinger, an online quote site should divulge insurers with more lenient standards in this area.
- Travel plans. People planning travel to risky parts of the world ordinarily have to pay a higher premium for life insurance. But comparison shopping pays off here, too, since rules on overseas travel vary from company to company.
- Credit history: Some life insurance providers will put your credit history into play. If you have concerns, like a bankruptcy in the past five years, find a broker or online quote service to tell you which insurers don't use this factor in setting rates.