What is the best type? How much should you purchase? Life insurance as a feature of a solid financial plan is a critical because it reduces risk, like the possibility that your family won’t have enough money if something were to happen to the income earner or care-giver.
Who needs life insurance?
Well, if you don’t have dependents, you probably don’t need life insurance. But, if you own a home, have children or others who depend on you, have a taxable estate or wish to leave money to charity, then life insurance can serve to protect your loved ones and the legacy you care about.
Term Life Insurance
There are other types, but term life is what most people need. Important factors to consider are the length of the insurance (the term), the face amount (the amount your beneficiaries receive if you die) and the premium (how much the policy costs). Term is the most straight-foward form of life insurance (i.e. no investment features). And it is by far the most inexpensive. The way it works is that you pay the monthly or annual premium and, if the insured person dies during the term (time of coverage), the insurance company pays the beneficiary the face amount of the policy.
Permanent Life Insurance
Beyond the need for a death benefit, there is whole life insurance. Unlike term life, it pays whether you die sooner or later. Instead of covering you for a temporary period (10, 20, or 30 years), so that you can take care of a mortgage or raising children, permanent insurance guarantees to pay a benefit whenever you die – even if you live past 100.
One common reason for owning whole life insurance is owning a taxable estate that can result in a considerable estate tax. In that case, death also provides the payout life insurance to cover the expense. You may also wish to bequeath money to a charity, which you can name as the beneficiary on the policy.
What is the right amount of insurance to purchase?
The types of things you should consider, include:
- The amount of money your dependents will require to maintain their current living standard of living
- Paying off a mortgage
- Hiring help care for dependent children
- College tuition to insure that children will be able reach their educational goals
- Be sure to factor in a few percentage points for rising costs and inflation.
- One rule of thumb is to add a “buffer” (about 10%). But be careful, too much coverage can be an unwise.
Who should you buy insurance from?
Shop with and purchase only from an independent broker – like Quality Term Life. An independent broker can show you competitive quotes from dozens of insurers. Whereas a captive agent can only sell insurance offered by one company,
As a side note, many people seem to think they can’t get life insurance because of a pre-existing medical condition or disease. But in almost all cases, there are affordable options available. Quality Term Life advisors can help you find the best insurance for your situation. Just give them a call.
If you don’t have life insurance now, be sure to add it to your overall financial plan. It is a critical risk management asset. But more importantly, it protects your loved ones’ future, giving you peace of mind – which is priceless.