Choosing Life Insurance
Too many Americans put off buying life insurance because they don’t want to think about dying. It can be scary, we know. But the younger you buy a life insurance policy, the cheaper it will be. There’s no time like the present to consider your needs and decide on a life insurance policy that works for your family.
Life insurance works very simply: you pay a premium every month, and when you die, the beneficiary you select receives a benefit. That benefit can be large or small—whatever you need for your circumstances.
Who Should Buy Life Insurance?
The short answer is, everyone with responsibilities that will continue after they’re gone. For instance, a breadwinner of a family needs life insurance to support their family if they die during their working years. A homemaker needs life insurance to pay for childcare and housework assistance for the family. A student whose parents have cosigned on their student loans needs life insurance to pay off the debt so their parents aren’t on the hook.
If you are wealthy, life insurance can pay some or all of the death tax for your estate, allowing you to hand down more of your assets to your children. On the other hand, if you are worried about your family having enough money, a small life insurance policy can cover burial expenses so that your family won’t have to worry about how to pay for a funeral.
The reason for buying insurance should give you a clue of how much to buy. How much money will your survivors need to handle your passing? If you can afford it, that’s the amount of life insurance to buy.
Types of Life Insurance
The two main types of life insurance are term and whole life insurance. Term life insurance lasts for a certain period of time (e.g., twenty years). If you die during the term, your survivors will receive the death benefit; otherwise, the policy expires. This is often cheaper than whole life insurance, because the company takes a chance that they might not have to pay anything. It’s a good choice if, for instance, you’re worried about replacing your wages to support your spouse.
Whole life insurance lasts as long as you continue paying the premiums. In some cases, whole life insurance can work as an investment, because the company invests the money for you. You can sometimes take a loan against the policy or withdraw some of the money early. Policies that allow this can serve as a kind of emergency fund.
How to Get Life Insurance
In general, the younger and healthier you are, the less you pay. For some life insurance policies, you will need to have a medical exam to assess your health. Easy ways of lowering your premiums include quitting smoking or risky hobbies.
But even if you are older or have poor health, there are life insurance options for you. You might choose a group life insurance policy through your church, union, or club. Another option is guaranteed issue life insurance, which is common for seniors or those with serious health problems.
Life insurance can have advantages beyond just insuring your life.
Of course the primary purpose of life insurance is to give a death benefit to your heirs.
It can fund some of your retirement, since you can withdraw money from it.
Since life insurance benefits are usually tax-free, it can help you manage estate taxes.
It can be an emergency source of funds, if the policy allows you to take out a loan.
Contact Us For Advice
When you’re shopping for life insurance, things can get complicated. What type should you buy? How large a policy do you need?
Don’t spend too much time worrying about it without taking action. Our advisors can help you crunch the numbers and pick out the best policy for your situation.