Life insurance isn’t the most pleasant topic to discuss, but it can provide peace of mind to your family. Nowadays buying life insurance can be quick and easy. There are several online tools and programs to help you identify the right amount of coverage for you and your family.
What is life insurance?
A life insurance policy is a contract between yourself and an insurance company. In exchange for paying regular premiums over a period of time, an insurance company agrees to pay face value of the policy to the beneficiaries upon your death. A beneficiary can be anyone: your children, a spouse or other family members. It’s an important safety net if anyone depends on you financially. A life insurance payout can be used by a beneficiary for debts such as a mortgage, income replacement, college tuition, or anything else.
“People were probably feeling invincible, but Covid made people realize that we’re all mortal,” said the president of a nonprofit raising awareness about life insurance.
Types of life insurance
There are two main types of life insurance, Term and Permanent
- Term life insurance covers a limited time period and does not build cash value. Typical time periods are 10, 20, or 30 years. If you pass away within the policy term period, your beneficiaries receive the insurance payout. At the time your term life insurance expires, you can buy a new policy.
- Permanent life insurance is more expensive than term insurance, but it does provide additional features like cash value. The cash value, which grows over time, can be borrowed against. The best known type of permanent life insurance is called Whole life.
Other types of permanent life insurance include variable and universal. Variable life insurance has a cash value and with investment options that work like a mutual fund. Universal life insurance has a cash value that grows based on the current interest rate set by the insurer.
Who needs life insurance?
If anyone depends on you financially you should have a life insurance policy. Most people select a term life insurance policy, which costs less than permanent insurance. Additionally, you can choose terms that match the vulnerable years when family members depend on you financially.
While term life insurance is sufficient for most families, whole life policies and other forms of permanent coverage can be useful if you want to provide money for your heirs regardless of when you die. These policies can be useful if you want to spend your retirement savings, but still leave an inheritance or money for end-of-life expenses.
How much life insurance do you need?
Consider your family’s priorities and requirements when determining the amount of life insurance to purchase.
- Do you have young children?
- Do you want to fund a college education for your children?
- Do you have student loans, car payments, or other debts?
- Do you need to replace your income to meet everyday living expenses?
Many companies provide some life insurance with your employment package, but it’s a good idea to have your own policy. Company provided insurance policies typically end if you leave the job; most likely, the policy isn’t enough to meet your family’s financial needs.
Selecting a life insurance company
Purchasing a life insurance policy is a big decision with long-term ramifications. You’ll want to select a reputable company that can honor its commitments. HereToday recommends using the ratings agencies A.M. Best or Standard & Poors to evaluate your options.
Compare life insurance quotes
To get the best rate and package for your family, request quotes from multiple companies. Prices will vary on the type of coverage that best fits your family’s needs. If you’re a senior, AARP offers assistance to select coverage from a choice of companies. Insurance fees are based upon personal factors like your health, age, and gender.
Peace of Mind
The topic of death and life insurance can be difficult for most people. Rest assured, with careful evaluation of your needs, selecting the right insurance policy will provide peace of mind to your family. A simple online search can generate a list of insurance companies, along with quick and easy ways to request a policy quote.
Disclaimer. HereToday is not a legal service. This content should not be taken as legal advice. Before drafting any legal document, please consult an attorney.