If you have a partner or children who are dependent on you, you may want to get life insurance to ensure they’re provided for after you’re gone. With all the life insurance options out there, though, finding the best life insurance for your situation can feel overwhelming. We’re here to help.
What is the best life insurance policy to get? It depends on what you’re looking for. Here’s a quick guide to different types of life insurance, so you can find the best life insurance policy for you.
Level term life insurance
Level term life insurance is fairly straightforward. If you die within a fixed, agreed-upon period from the start of the policy, your dependents will receive a fixed, agreed-upon sum. For example, you might take out a level term life insurance policy to ensure that your family will be provided for if you die before your children reach adulthood, or if you die before your mortgage is paid off.
Bear in mind that, as the sum is fixed at the start of the policy and won’t be adjusted for inflation, the policy may end up paying out at a time when the sum is worth less than you hoped. Your premiums – the regular payments you make towards the policy – should also stay the same throughout the term.
What is the best life insurance company for level term life insurance? Level term policies are more or less the same between providers, so all you need to do is find the company that offers the best price for the term and sum you need.
Increasing term life insurance
If you’re concerned about inflation, you could get an increasing term life insurance policy.
An increasing term life insurance policy is essentially a life insurance policy with interest. As with level term life insurance, this policy will pay out if you die within a prearranged period of time. However, in an increasing term life insurance policy, the amount that will be paid out increases over time. So, for example, if you die fifteen years after taking out the policy, the sum your dependents are entitled to will be larger than it would be if you died five years after taking out the policy.
As the payout increases over time, your regular payments will also increase.
When looking for the best life insurance companies for increasing term insurance, be sure to pay attention to how the payout and your premiums will increase over time. This may not be the same from company to company.
Decreasing term life insurance
Decreasing term life insurance is another type of fixed-term policy. This time, though, the potential payout decreases over time. This may be the practical choice if you want your life insurance policy to help pay off a debt that’s expected to decrease over time, such as a mortgage.
If you’re taking out a decreasing term life insurance policy to help with a specific debt, check how quickly the payout is going to decrease. If the payout would decrease faster than your debt is expected to, you may prefer a different provider or policy.
Whole-of-life insurance
As the name suggests, a whole-of-life insurance policy covers the whole of your life, rather than a fixed term. In other words, the policy should pay out regardless of when you die.
There’s a certain security in knowing that you’re covered, and that you won’t have to worry about taking out a new policy when your current policy expires. However, whole-of-life insurance can be a lot more expensive than term life insurance. After all, when you take out whole-of-life insurance, the insurance provider will know they’ll need to pay out eventually.
Joint life insurance
You and your partner may choose to take out a joint life insurance policy. In this case, if either of you dies during the arranged term, the policy will pay out to the surviving partner. At this point the policy will end, and the surviving partner will need to take out a new policy if they still need life insurance. If this doesn’t suit you, you may each decide to take out your own life insurance policy instead.
Knowing your options means you can find a life insurance policy that suits you. Once you’ve pinned down the best life insurance policy for your situation, you can move on to comparing life insurance providers.