Would your family be financially secure if you suddenly couldn’t be there? Could they still achieve their goals? Although it’s unpleasant to think about, you should create a plan to protect your loved ones in case you pass away. Getting life insurance coverage plays a significant role in that plan.

Here’s what you need to know to obtain a policy that’s right for you.

What Type of Life Insurance Policy Should You Choose?

There are several different kinds of life insurance policies available. But, the main options you should become familiar with are whole life insurance and term life insurance. Whole life insurance is permanent coverage and lasts until you die, even if you live to 120. Term life insurance lasts for a defined period of time - typically 10, 20, or 30 years.

Term life insurance is intended to be a safety net for your family in the event of your premature death. The idea is that the coverage will last through your family’s formative years when they’re most vulnerable. Typically, the money would be used to:

• pay off your mortgage
• cover your children’s education
• replace your income for a set period 

In most cases, term life insurance is a smart buy. It’s significantly less expensive than whole life insurance (the premium is hundreds of dollars per year instead of thousands) and should provide adequate coverage. During the 20 or 30 year coverage period, you’ll have the opportunity to amass other assets to leave to your family when you pass.

On the other hand, while pricey, whole life insurance can be appropriate in some situations. For example, a child with special needs who will require lifelong care could benefit from the extended coverage. One other perk of a whole life policy is that it gradually builds cash value that you can tap into. Some policies even have investment options and pay dividends. However, in most cases, term life insurance has zero value unless you die within the policy term.

How Much Life Insurance You Should Buy

Once you’ve decided what type of policy works for you, you should determine how much coverage to buy. When you consider your family’s situation, how much money would they need to live a secure life without you? Here are some factors to include in your decision-making process:

• Your annual salary -- and how many years of it you want to replace
• The balance on your mortgage
• The number of children you have multiplied by how much you want to contribute to their college costs
• Funding for long-term care of a family member
• Funding for specific family goals
• How much life insurance you already have through your employer (assuming the coverage is portable if you leave the company)

Sum up all of these factors, and then add in a cash buffer. Life happens, so it’s better to overestimate your family’s financial needs than to leave them scrambling.

Bonus Resource: Try this life insurance needs calculator.

How to Shop for Your Policy

Now that you have a solid understanding of the coverage you need, it’s time to shop! You could contact an insurance broker if you like personal service. But, if you’re a DIY kind of person, the internet has made it easier than ever to find and compare life insurance policies. 

Each insurer will have its own website. Many of those sites provide a way to obtain or request a quote online. If you want to save time, sites like Policygenius will let you make a side-by-side quote comparison -- and apply for the coverage you select.

What to Expect During the Shopping Process

Your life insurance shopping experience will vary based on which insurer you work with. All life insurance companies will have some sort of application process. Most will ask questions regarding your medical history. 

Depending on your answers, you may be required to undergo a medical examination to determine your insurability. Typically, the insurance company will send a nurse to your home to complete the exam at no cost to you. It’s a relatively quick visit that feels like an annual physical and usually involves bloodwork.

If you need to go through an exam, or if the insurer has trouble getting any of your medical records, it could take weeks to get a decision on your application. If neither of those things apply, you could be covered almost instantly. Most insurers will give you a way to track the status of your application online.

What You Should Do After You Buy Coverage

Your application has been approved, and your coverage is in place -- yay! But, you’re not quite done yet. Now, you need to make your family aware of your life insurance -- and put a copy of your policy in a safe place. That way, if they need to make a claim, they can do so quickly and easily.

Pro Tip: Put a paper copy of your policy in a fireproof box at home or in your safebox at the bank. Then, save a copy digitally and give your family access to the file.

Final Thoughts

It’s not easy to think about your own mortality. But, it’s important to create a plan that protects your family in your absence. A life insurance policy can help your loved ones grieve your loss without financial worry. They’ll ultimately be able to pursue their goals with the resources you’ve left behind. 

This article provides general education only. If you’re feeling unsure about securing life insurance that works for you, consider speaking with a qualified financial planner for guidance tailored to your specific situation.

Laura Gariepy

Contributor

Laura Gariepy is a freelance writer that specializes in personal finance, careers, and small business. She owns  Every Day by the Lake , a written content creation company that helps busy business owners connect with their target audience. You can follow her on Twitter  @EverydayLake.