Which Type Of Life Insurance Should You Buy
When it comes time to buy a policy, most people choose between term and whole life insurance .
Term life insurance pays a death benefit if you die during a set coverage period .
Whole life insurance pays out no matter when you die and comes with a savings-like component called the cash value that you can access while youre alive.
Term life insurance is the best choice for most people because premiums are five to 15 times cheaper and youll likely have few financial obligations by the time your term policy expires. Both term and whole life insurance allow you to customize your policy with riders.
It Can Replace Lost Income
Whether you have a 9-to-5, are self-employed, or own a small business, your income might cover a portion or even all of your family’s daily needs.
Housing, food, utilities, clothing, car maintenance and health care premiums are likely all part of your monthly budget, and even without your income, your family will still need to cover these expenses. The death benefit from a life insurance policy can help provide the funds your family may need to help cover these expenses. When considering your options, you may want to think about using a life insurance calculator to help you determine how much life you insurance you may need.
Life Insurance Can Ensure Your Business Survives
Todd and Chris started a business together and over the years it grew into a successful enterprise. Their financial advisor recommended using whole life insurance policies to make sure that if one partner died, their family would be taken care of, and the business would survive the loss.
Todd purchased a $1 million whole life policy on Chris and vice versa. Years later Todd was killed by a drunk driver. Chris received the death benefit from his life insurance policy on Todd, which he used to buy Todds share of the business from Todd’s family.
This arrangement allowed Todd’s family to be fairly compensated for his half of the business, while also allowing the business to survive without taking the major financial hit of paying off Todd’s family.
This is called a buy/sell agreement and is a fairly common arrangement for small business partners.
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Protects Against Critical Illnesses
The world that we live in has been changing. Despite the fast-paced life, we spend most of our time in front of screens, making our lives quite sedentary. This has led to an increased incidence of lifestyle diseases. Many life insurance plans these days come with the option of protection against critical illnesses. So if the policyholder has chosen this option and if he/she gets diagnosed with any of the listed critical illnesses, then the insurance company would be bound to pay a lump sum amount to the policyholder. This payout can be used for treatment costs, or for any other purpose as the policyholder may deem fit.
Insurance Can Be Confusing And Its Hard To Know What You Really Need Or Want But Here Are Five Very Good Reasons Why You Need Life Insurance
As we grow older, get married, build families and start businesses, we come to realize more and more that life insurance is a fundamental part of having a sound financial plan. Depending on your type of policy, life insurance is fairly cheap, which means theres no excuse not to get coverage now. Plus, over the years, youll find comfort in knowing money will be available to protect your loved ones in the event of your passing. Here are a few other reasons why having life insurance is important.
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Should You Use Life Insurance As An Investment
Its possible to consider life insurance to be an investment if you have a policy that builds cash value. Cash value policies are generally touted as another way to save or invest money for retirement. These policies help you build up a pool of capital that gains interest. This interest accrues because the insurance company is investing that money for its own benefit, much like banks. In turn, they pay you a percentage for the use of your money.
But its important to consider the rate of return that you might earn. If you take the money from the forced savings program and invest it in an index fund, for example, you may realize better returns. For people who lack the discipline to invest regularly, a cash value insurance policy may be beneficial. A disciplined investor, on the other hand, could generate higher returns by putting the money they would pay toward premiums in the market.
The Different Types Of Life Insurance Policies
There are several different types of life insurance policies to choose from, so its important to choose the one that is right for you.
The most common types of life insurance policies are term life insurance and whole life insurance.
Term life insurance is a policy that provides coverage for a specific period of time, usually 10 or 20 years.
It is less expensive than whole life insurance, but if you die during the term of the policy, your beneficiaries will not receive any money.
Whole life insurance is a policy that provides lifetime coverage. It is more expensive than term life insurance, but your beneficiaries will receive a payout if you die during the policy.
Which type of life insurance policy is right for you?
That depends on your unique situation. Make sure to compare the cost and benefits of each policy before making a decision.
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Provide Cash For A Rainy Day
Permanent life insurance policies can provide financial support during your lifetime as well as after your death. Permanent life insurance lasts your whole life as long as you pay your premiums, and it builds cash value over time. This money can help you achieve big and small financial goals during your lifetime, including covering college costs, paying for home improvements, or paying for a big trip. You can borrow from it tax-free or use it as collateral for a loan.
How To Choose The Right Life Insurance Policy Type
With all of the life insurance options available, it may seem complicated to choose the right one.
Start by deciding between term life and permanent life insurance.
Consider a term life insurance policy if you need life insurance for a specific amount of time. For instance, if you want insurance to cover your working years as possible income replacement if you were no longer around.
Term life insurance is also a good choice if your budget is limited. Since term life insurance provides protection for a specific amount of time, and its not a cash value life insurance policy, the rates will be lower than permanent life insurance.
As you enter different stages of life, your life insurance needs may change. Many term life insurance policies are convertible to a permanent policy. The options will depend on your policy and insurer. Term life conversion allows you to switch to a permanent policy without re-applying or taking a life insurance medical exam.
On the other hand, a permanent life insurance policy will last for the duration of your life. If building cash value is important to you, look at permanent life insurance options. But if youre purchasing a permanent policy only to capitalize on the cash value accumulation, depending on the policy, youre better off putting your money into a savings or investment vehicle, so youre not paying for the life insurance and charges within a permanent policy.
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Who Should Purchase Life Insurance
Life insurance should be considered an essential purchase for any adult who has family or loved ones who depend on them financially, or who would pass on significant debt to loved ones in the event that they die unexpectedly. This includes:
- Parents of young children Who have children that are financially dependent on their salary for basic things like food and shelter
- Parents of older children Whose children depend on them to pay for college, and other things
- People who are married Whose spouses would take a financial hit if the other died
- People who are single Who have children, brothers, sisters, parents, etc. who would benefit from a life insurance payout
- People with debt College students who have significant student debt, people with mortgages or business loans, anyone with outstanding significant debt that would pass on to their loved ones
- People who dont have money to cover funeral/burial expenses Life insurance is often purchased to make sure the cost of burial/funeral expenses doesnt get passed on to loved ones
Life Insurance May Not Be As Expensive As You Assume
Lets address this first, because it seems to be a stumbling block for many people.
While the cost of life insurance coverage depends on a lot of variables like age, sex, overall health and type of policy, it typically costs far less than people think.
In fact, for healthy people under age 40, a $500,000 20-year term policy can be less than $37 per month for men and $33 for women. If you’re under age 30, it can cost less than $30 per month.2
Naturally, as you age, buying life insurance becomes more expensive because your health declines and the odds of dying sooner increase. So lock your rate in now while youre young and healthy and save yourself from paying a higher premium later.
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Tips For Shopping For Life Insurance
Are you convinced that you should buy life insurance?If so, here are some guidelines to keep in mind:
- Get a medical exam before you apply youll need to provide your latest medical records
- Choose a term policy instead of a whole life policy if you want to save money
- For a settlement option, consider an annuity payment instead of a lump sum this means your loved ones will receive a portion of the money every year instead of all at once
- Purchase separate policies for each spouse
- Calculate your coverage needs based on your current financial goals
These tips will help to simplify the process of shopping for life insurance and help you get the best coverage for yourself and your loved ones. And for stay at home parents, dont think that its not crucial for you to buy life insurance for yourself! Again, consult with a good, experienced life insurance broker to go over all of your options.
Is Life Insurance Worth It
Life insurance is worth it because it serves as a tool to manage the risk of dying prematurelywhether you currently have a family or not!
According to the actuarial tables put out by the U.S. Social Security Administration, 15% of American men and 9% of American women will die before the age of 60.
If you have a spouse or children, do you want to take the chance that you could die and leave them without your incomeas well as the unexpected expense of your funeral and other final bills?
Even if you don’t have a family to support, things get even more complicated. Sure, cousin Bob, the newly-licensed insurance agent, has told you that you really need life insurance . But is that actually true?
The answer is maybe.
Even if you don’t have any dependents or you already have life insurance coverage through work, it might still make financial sense to purchase a separate life insurance policy.
There are actually many uses for life insurance. Those who fail to understand how life insurance fits into their financial plan can end up inadvertently creating a financial crisis when they pass away.
While you may find that you truly dont need life insurance, understanding the many different reasons why its important can help you make an informed decision.
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Life Insurance Coverage May Depend On Your Financial Goals And Needs
Death, just like taxes, is inevitable, though most people may not be keen to dwell on it. But ensuring that you have the right financial resources in place, including life insurance, is important if you have loved ones who depend on your income. Life insurance can help cover funeral and burial expenses, pay off lingering debts, and make managing day-to-day living expenses less burdensome for those you leave behind.
If you dont have life insurance, or you do but are unsure about whether your policy is sufficient, heres how to evaluate your coverage needs.
Paying Federal Or State Estate Taxes
Depending on state laws, your heirs may need to pay an estate tax upon receiving an inheritance. The III says that life insurance benefits may be used to partially or completely offset this cost. It’d be a good idea to consult with your insurance provider or a financial professional to understand how estate taxes may affect your beneficiaries.
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To Protect Your Business
The death of a key employee or business owner can cause financial problems for your business, which is why many organizations use life insurance to manage risk. If the person who dies is responsible for business development, sales may fall sharply after their death. Or if you need to hire help quickly to fill a crucial role, you might need cash to pay recruiters, a signing bonus, and the first several months of salary.
Although key person life insurance is an expense for your business, it might not be deductible. Speak with your CPA before making any decisions or counting on a deduction.
Life Insurance For Type 2 Diabetics
Life insurance companies consider type 2 diabetics to be a reduced risk than Type 1 diabetics, especially if you can manage it with lifestyle changes or oral medication and have had no complications. Insurers are more likely to judge you favorably because it is frequently diagnosed in maturity. As long as youre otherwise healthy and havent had any difficulties, having Type 2 diabetes should not preclude you from obtaining a policy. Keep in mind, though, that it will damage your life insurance rating and raise your premium.
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Reasons Why Life Insurance Is Not A Waste Of Money
Do you think life insurance is a waste of money? We dont. Here are the reasons why:
In The Case Of Renting The Property
The answer is both.
Home insurance purchased by the lessor and the lessee allows both parties to be quiet about the coverage of damages that can happen to the house, for example – plumbing damage whose repair without insurance can reach thousands of shekels and of course also cause damage to both the structure of the house and its contents. Therefore, it is recommended that in the case of renting a property, the owner The apartment, i.e. the landlord – will purchase building insurance and the tenant, i.e. the tenant – will purchase contents insurance.
As a property owner who rents out his apartment, it is highly recommended to insure the apartment’s structure and for optimal coverage, it is recommended to add to the insurance coverage against plumbing damage as well as coverage against damage caused to a third party.
Also , in order to avoid unpleasantness in tenant-landlord relations, it is recommended to add a paragraph in the policy in which the insurance company undertakes not to sue the tenant for damages caused to the apartment structure through his negligence.
As an apartment renter, you should insure the contents of the apartment that belongs to me.
The advantage of the insurance is that it already includes third party coverage that protects against damages caused by my negligence to a third party .
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What Does Home Insurance Cover
Apartment insurance consists of two main coverages:
– covers damages caused to the building itself and the adjacent buildings permanently connected to it, such as kitchen cabinets, air conditioners, bathroom cabinets, marble, and the like.
In fact, everything that is permanently attached to the walls of the house.
In an apartment in a shared residential building, the coverage also includes the insured’s relative share of the shared property and special attachments that the apartment has .
– the contents of the house consist of all the objects found in the apartment.
Apartment contents insurance covers the contents inside the apartment, such as electrical appliances, furniture, toys, clothing, etc.
The insurance also includes coverage for valuables such as jewelry, watches, silverware, etc. up to the limit of liability specified in the standard policy and provides an insurance response to all objects found in the apartment and specified in the terms of the insurance policy.
Home insurance covers damages caused to the insured’s property due to specific events specified in the policy, such as fire, explosion, earthquake, flood from an external water source, burglary, theft, malicious damage.
Also, there are additional coverages that can be added to the policy, some without additional payment and some with additional payment from the customer, for example:
Can I Cash Out My Life Insurance Policy
If you own a permanent life insurance policy that accrues cash value , you can often borrow against or withdraw some or all of that value. The death benefit will typically also decline proportionally to the amount you take out of the policy. If you surrender the entire amount, you will lose all of your coverage.
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