Finding life insurance that fits your goals and budget can be difficult without assistance, but it can be a crucial tool for financial planning. Not to worry. You can concentrate on the crucial elements of choosing a policy that meets your needs by following a few easy steps.

Check to see if you require life insurance.

Yes, life insurance is helpful, but not everyone needs it. If any of these situations apply to your circumstance, you might want to think about buying a policy.

Someone relies on you financially and will probably still require a sizable amount of money after your passing.

Your intended inheritance will be diminished since your estate won't have enough liquid assets (cash, investments, real estate, or other goods that can be sold) to pay its debts and taxes.

To ensure that your assets are protected for your legacy and heirs, you want to pay for your funeral and burial at the very least.

If not, you might not require life insurance. You can also think about using life insurance as a practical means of leaving a charity legacy for an organization you believe in.

Determine the amount of life insurance you require.

Many people may find this step of the process intimidating, but it doesn't have to be. Take a quick inventory of your finances and respond to these three important questions:

What financial resources will be available to your survivors or heirs after your death? Look at three primary categories of resources:

Social security and other retirement-related survivor benefits;
group life insurance (e.g. a policy you may have through an employer); and
other assets and financial resources.

When will these resources become available? For example, social security survivor benefits are payable immediately to a surviving spouse if there are dependent children. If not, social security may not be available to your spouse until after age 60. 

Determine what your survivor's financial needs may be after your death. For simplicity, you might focus on three categories of requirements: final expenses, debts, and income needs.

Next, subtract your survivors' financial resources from their financial needs to determine how much coverage to buy. Many people are underinsured, often because they skip these steps or take a shortcut (such as simply buying a multiple of annual income).

Decide on your financial goals for your life insurance.

The overall reason for buying life insurance is to leave behind financial resources for who or what is important to you. Premiums payments to the insurance company go toward the death benefit, the financial payout after your death. Many people plan for this money to take care of their final arrangements, cover living expenses for loved ones, or support a favorite cause. However, you can also use a life insurance policy to accumulate savings, maximizing the income you will have for your retirement or providing an income stream after your death for your survivors. 

Determine what type of life insurance best meets your financial needs.

You may have heard about various categories of life insurance, including term life, whole life, and universal life. Each of these comes with fundamental distinctions. Consider how these differences might work for you.

Term life policies offer payment of a specified death benefit for a specific term of your life, such as five, ten, 15, or 20 years. Term life insurance coverage for most people tends to involve lower premiums; however, the longer the term, the more expensive your premiums may be. If you want insurance coverage for only a specific period or are on a limited budget, a term life policy may be a good fit.

However, what if you want to purchase insurance coverage for several decades until your death. Or, perhaps you'd like the option to use some of your premiums to accumulate savings? A whole or universal policy might be a good option in either of these cases. Basic whole life insurance involves a fixed premium and promises a minimum rate of return on the dollars invested, which builds the policy's cash value. A universal life insurance policy may offer the potential to increase the death benefit or adjust premium payments.   

Find out if you need to add any "riders" to the policy.

Life insurance policies offer primary benefits according to the type of policy you purchase. But your coverage can be expanded or personalized through riders, optional additions to a life insurance policy that provide supplemental coverage or benefits you wouldn't receive with a standard policy. Adding some riders may increase your premiums, while other riders might be free.

There are two riders that you may want to consider: waiver of premium and guaranteed insurability. Some policies come with one or both included with the basic contract, but if not, it is generally a good idea to add them. Waiver of the premium pays the life insurance policy premium for you if you are disabled. Guaranteed insurability permits you to add to the death benefit without providing additional evidence that you are in acceptable health.

Shop around to find the best life insurance coverage for you.

There are many ways to save money when buying life insurance, but they don't always entail paying a lower premium immediately. Nonetheless, life insurance is a very competitive business, and, therefore, quotes can vary significantly between companies. Consider that what's important is that you get the coverage that fits your budget and financial goals. If you choose to work directly with an agent, make sure your agent knows about your financial situation and takes time to explain your options in easy to understand terms.

Decide whether to pay annual premiums at once or in installments.

You may have the option to pay an annual lump sum or spread out the yearly cost over smaller, more frequent payments. It may be more cost-effective to pay annually as often there may be a relatively large additional charge for paying in installments. Decided what works best for you.

Tell your beneficiaries about your life insurance policy.

Once the policy is purchased, tell your beneficiaries which company issued it, where to find the paper copy of the policy, and any specifics about what you want them to do with the death benefit. While it is rare for people to be unaware they are the beneficiary of a life insurance policy, it does happen, and benefits may go unclaimed. Don't forget to store your documents so that your beneficiaries can easily access them.