Who Needs Life Insurance?
The primary responsibility of life insurance is to replace future earnings should a primary bread winner pass away. If you have children, a spouse or a parent that depends on your income, then life insurance might be a good choice for you. On the other hand, if you're single or have accumulated enough wealth, you may not need the added expense.
Assuming you're among the majority of Americans that believe life insurance is vital, this article will help you determine which type of policy and how much coverage is most appropriate for your particular needs.
Term vs. Life...Which is Right for You?
Term Life Insurance: The following benefits make term an attractive option for young families because it won't break the bank and still provides decent coverage for a set period of time.
- Flexible terms: Typically, a term policy ranges from five to 30 years.
- Affordable peace of mind: Because it's for a set period of time, insurers can offer this type of coverage for less. The odds are in their favor that they'll never have to pay out.
- Simplicity: There's nothing complex about this type of policy making it easy to price shop and get a reasonable policy.
Permanent Life Insurance: While this type of policy is a bit more complicated and features a number of variations, (whole life, variable life and universal life), it can be an excellent choice if you're concerned about asset protection or like the idea of a forced savings plan.
- Allows you to build tax-deferred cash value that you can draw against as you age.
- You can cash in your policy or receive dividends tax free as long as the amount collected is less than the amount you've paid in premiums.
- You can borrow against the policy from the provider.
- Provides an opportunity to earn on your investment.
If you are overwhelmed by the choices, speak to a financial advisor for advice to adequately meet your family's goals, even after you are gone.
How Much Will You Need?
Consider the following when determining how much money your family will need:
- Will you have an unpaid mortgage debt? Student loans? Credit card balances?
- What is your life expectancy?
- How flush is your nest egg?
- Do you have a non-working spouse? In the event of his/her death, you may need funds to help cover expenses like child care.
Answering these questions should help you evaluate how much would be required should the unexpected happen.
How Do I Get the Best Rates?
If you don't shop around, odds are good you'll overpay. When you do obtain policy information from multiple companies, make sure the estimates are apples-to-apples and the coverage is adequate for your needs.
Act Sooner Rather Than Later
Buying life insurance at a younger age is always better. In all cases, premiums only rise as you get older. Even if you're in good health, you'll still pay more for every year you put it off. And as you age, the odds of developing a serious illness rise which could result in much higher premiums or even being denied coverage entirely.
Review Each Year
And finally, once you obtain a life insurance policy, always take the time from year-to-year to review your policy to make sure it still fits your needs. You'll enjoy the piece of mind for yourself and your family.