Things to Consider When Comparing Permanent Life Insurance Policies
How to Compare Permanent Life Insurance Policies
Life insurance is a must, but the process of choosing a policy can be a little too confusing sometimes. With so much variety in insurance policies, there are a lot of options to consider. Your final decision will ultimately come down to making a cross-comparison and choosing the permanent life insurance policy that best aligns with your needs. But how do you compare? What should you consider? These questions always come up during this process, but first, consider this.
What Is Permanent Life Insurance?
Unlike regular policies, permanent life insurance policies don’t have an expiration date. It expires when the insured party is still alive passed a particular age. The death benefit and cash value are two of the main advantages of permanent life insurance.
Permanent life insurance breaks down into two types: whole life insurance and universal life insurance. For the first one, it usually is guaranteed, while for the second one, it can vary depending on market performance.
Here are some tips to help you know what to look for when comparing permanent life insurance.
Compare Based on Rate of Return
In general terms, policies that have the same premiums along with a high internal rate of return are searched for more often. The IRR for life insurance is very high in the early years of the policy. If you want to evaluate a plan, the best way to do it is by requesting an optional report that shows the IRR of that policy.
Consider the Death Benefit
The death benefit will vary from person to person, depending on what they need to leave behind to their beneficiaries. Also, it depends on the financial situation. You have to factor in your debt load, annual income, and anything else that plays a vital role in your economic life. Ideally, the death benefit on a policy should be 4x to 5x your annual salary.
Consider Age and Health
The cost of insurance is affected by both age and health. Premiums are lower for those who are younger and higher for those who are older. If you suffer from any health issues, that will also affect your premiums.
Study the Insurance Company
Sit down with an agent you can trust and go over your options. The financial stability and rating of an insurance company matters. So, in addition to considering their product offerings, be sure you choose a financially reliable company.