Life Insurance, What You Need To Know
Insurance sales are a big business because most people recognize that life insurance is an excellent way to provide a financial safety net for your family. The primary benefit of having an insurance policy is that your loved ones will receive a lump sum of money after you pass away. However, some insurance policies let you access money that accumulates in a cash account. You can use this money to pay for various expenses, like medical bills, paying off your mortgage, or college tuition. There are many life policies, so it is essential to determine which type will be best for your needs. So, do you need life insurance?
Two Types of Life Insurance
The two types of life policies are whole life and term life. Whole life, also known as permanent life, is an excellent option for lifetime coverage and maximizing its cash value. Monthly premium payments for a whole life policy never change, and you can use the cash value accumulation to pay the monthly premiums in the future. You can also use the cash value to take out a loan and use the money for any purpose. Unlike a bank loan, taking out a loan from the cash value in a whole life policy does not require a credit check, proof of income, or collateral.
A term life policy provides you with protection for a specified time. Term policies commonly last 20 years, but they can also last as little as ten years or as much as 30 years. Term life has a fixed death benefit that your beneficiaries will receive if you pass away during the policy term. There is no cash value accumulation in a term policy. The lack of cash value means the monthly premiums for a term policy are lower than a whole life policy. You can convert a term policy into a permanent life policy at the end of the term.
The Importance of Life Insurance
You have no control over when you will pass away, but you do have control over how much money your loved ones will receive from a life policy payout after you die. Life insurance is an excellent way for you to leave a legacy, such as
· Helping to relieve your spouse of any financial worries as they emotionally recover from your passing
· Leaving money for your children so they can go to college or start a business
· Leave something for other family members for them to remember you
· Giving a portion of the life insurance payout to your religious organization or favorite charity
When should you get life insurance?
The best time to get a life policy is when you are healthy and in your 20s or 30s. Insurance is a lot more affordable when you are healthy and young. Women and non-smokers also may qualify for preferential pricing for their policies. Most insurance companies require you to take a medical exam to determine your risk.
The medical exam is not as bad as you may think. This exam can take place in your residence at your convenience and takes around 20 to 30 minutes. The insurance company uses the results of this exam to determine your risk and establish your monthly premium. A nurse will visit you to conduct the exam. Some of the information the nurse will gather include:
· A list of all medical conditions, medications, and doctor information
· Driver’s license information
· A height, weight, and blood pressure recording
· A urine sample and blood drawn to test for high cholesterol, high blood sugar, nicotine, and drug usage
How to Choose a Policy
When choosing a life policy, you should consider how long you plan on keeping the policy. For example, you might choose a 20-year term policy to provide a death benefit to your children until they no longer rely on you financially. On the other hand, maybe your children are older, so a 10-year term policy is more appropriate. If you have long-term goals and need money to supplement your retirement, you can choose a whole life policy. Other factors include:
· How much money do you have to spend each month on premiums?
· Do you have any pre-existing health conditions?
· Do you own a home, or are you renting?
The Cost of a Policy
The cost of the premiums will vary depending on your age, health, and risk level. The monthly premiums for a term life policy are generally cheaper than whole life coverage. Yet, term life premiums will increase if you renew the policy after the term life policy is over. Also, the amount of the death benefit determines the monthly premium. For example, a one-million-dollar policy will have a higher monthly premium than a $500,000 policy.
Final Thoughts
So, do you need life insurance? Life insurance is necessary for everyone, but the best policy will depend on your individual needs. You should consider your age and your financial situation before choosing a policy. In the event of your death, the death benefit can cover any unforeseen costs to your family. Life insurance will give you peace of mind knowing that your family will be protected after you are gone.
