4 Important Factors in Choosing the Right Life Insurance Policy

When it comes to choosing the right life insurance there are many different factors that come into play.

When I'm working with clients and helping them choose the life insurance that makes the most sense for them, we want to make sure we visit these factors.

Some of these factors include choosing the right life insurance company, choosing the right amount, choosing the right term.

Today, I want to visit the some of the most important factors you should have in choosing life insurance for yourself.

1. Choose the Right Insurance Company

The first factor that comes into play when choosing the right life insurance is make sure that you're choosing the right life insurance company.

• But what do you look for?
• How do you know if it's a good company?

You want to check the ratings and make sure that they're a stable company.There are various rating agencies such as A.M. Best, Moody's, S&P, Weiss. All these different agencies will give the insurance agencies a report card rating to show how financially stable they are.

Typically, if you are looking for a strong solid company you don't want anything below an A- rating. I actually have the link on my blog that shows you all the life insurance company ratings.  If you're not sure on the life insurance company, be sure to check that table.

2. Choose the Best Rate (but be careful)

The second most important factor when choosing life insurance, which I'm sure is very important to you, is making sure you get the best the best rate ' the cheapest rate. How do you know if you're getting the best rate? If you're using the free life insuranece quote engine on my site, we're using various insurance companies making sure that we are getting you the best independent quote. You want to make sure you are using an independent agent.

There are other captive agents such as State Farm, Nation Wide, Country Companies and typically they are quoting their own company's rates. You may get a discount if you pile in your auto and home, but typically I've been able to save my clients a lot of money by going the independent route.

Sometimes the cheapest term rate isn't always the best option.  Why you ask?   If you have some sort of pre-existing health condition (diabetes, high cholesterol, sleep apnea) then going with the cheapest rate might be a sure fire way to get denied.   Before choosing a certain carrier, make sure to work with your agent and be transparent about your health history.   The more information you share up front the better chance your agent has to get you to the right company.  Certain insurance companies are willing to work with certain conditions which would be considered high risk life insurance.

3.  How Long of a Term Do You Need?

Another factor that will also have a bearing on your cost is how long you are purchasing the life insurance for or what's most commonly know as the term. Typically, you're going to see 10-year, 20-year, and 30-year term policies. Although, now I have been seeing some 25-year or 40-year terms, most typically I work in the 10- to 30-year period. Depending on your situation, your age, how long you plan on living for, how much debt you have will determine how long of a term you get.

If you saw a previous post of mine, I talk about how I was able to buy a 30-year term policy for myself, and for me 30 years makes a whole lot of sense. If you're a younger individual, 30 years may make a lot of sense for you, too.

Now if you're a little bit older in the 40- to 50-year-old range, maybe a 10- to 20-year policy will be all that you need. A neat feature with the quote engine on my site is that you can get all these costs on the 10-year to 30-year so you can see and compare how much it cost to go from a 10- to a 20- to a 30-year term.

4. How Much Life Insurance Do You Need?

The last factor that comes into play, and it's a question that I get all the time is how much life insurance do I need. I wish there was a blanket answer. There are some general rules of thumb, which I will share with you real quick.

The first general rule of thumb about how much life insurance you need to buy is to take your income, multiply it by 10 and that will then determine how much you should buy. If you're young, maybe you don't want to buy just 10 times. Maybe you want to buy 20 times because if you plan on getting raises over the course of the next 5-10 years, obviously what you buy today will not be enough 5-10 years from now.

Another way you can determine how much you need to buy is a method I use. I figured how much I want my wife to have as an annual income in case something happened to me. Then, I took that number and I divided it by 5% thinking that if she invested the money she could earn at least 5% and that should get her that number. For us that magic number was 2 million dollars of term life insurance that we ended up buying. (I actually bought $2.5 million for some extra cushion)

As you can see there are many factors that come into play when choosing the right life insurance for you. If you still have more questions, feel free to contact me at the blog or if you want to call me direct, you can email me, leave a comment on the site, whatever you need to do to get in contact with me to make sure you get your questions answered regarding choosing the right life insurance.