There's some security to having life insurance in place to protect your family or income.
Who can put a price tag on the well-earned peace of mind you get with life insurance? People often puzzle over whether to get life insurance or not. Retirees and middle-aged moms think critically about the costs vs the benefits.
Essentially, it simply comes down to an individual question: “Would my untimely passing lead to a financial strait with any of my loved ones?” If you are thinking yes, it is the right time a life insurance policy.
Life insurance gives the much-needed facet of peace of mind to your life, and you might even live longer without the stress. How wonderfully ironic!
Why have life insurance?
The most obvious reason that most of us know is that life insurance can be used to pay the funeral expenses – a fact that is just being looked over or put off. However, there are several other areas where the life insurance benefit can be spent and used. Here are some ways how you can use life insurance other than your funeral expenses:
Your house is your own personal sanctum. The need to protect your home is a very primeval instinct and a very important one. It is, like life insurance, one that is often overlooked.
Some insurance providers gives you the option to get mortgage life insurance that matches the number of years left on your mortgage; while some policies offer a decreasing benefit where the death benefit goes down with the mortgage balance. In short, the movement of your premiums is concurrent to your debt.
However, a term or whole life insurance policy can also be used to pay off the balance of the mortgage. It is best to analyse your personal situation to decide which option is best for you and your family.
In addition to making sure that your loved ones are not left homeless, your life insurance policy can also replace the income that is lost when you die. With the growing needs of the family most households today are two-income households.
There is both an advantage and a disadvantage here. It could provide a lot of income stream to the family; but if one of you passes away, the household suffers a loss of that additional income leaving the family make drastic changes to their lifestyle.
In addition, life insurance money can be used to fund your children’s college education or pay outstanding debts. Basically, whatever type of life insurance policy you purchase should protect your family financially in every way in your absence.
Who needs life insurance and who qualifies?
One good practical rule to live by is that if you’re an adult earning income, you need to life insurance that will keep going until your small child is out of college. If you have big financial obligations like a mortgage or huge credit card debt, then that debt will be covered if you die. Death benefits on life insurance packages do not get federally taxed, and financial planners usually use them to pay off estate taxes that are created after someone in the family dies of an untimely death.
- Determining if you meet qualification standards and criteria is based upon the results of a medical examination, medical history, credit score, alcohol use, and driving history. Your lifestyle will determine if you qualify or not. Your health will also play a role.
- The two top ways that life insurance companies tabulate the amount of insurance a person can get is based on the human-life approach and needs approach. The former is based on the expected income a person will make throughout the course of his life expectancy. The latter is based on continual and odd expenditures that may come up.
Term life insurance
Term life insurance is pretty simple and straightforward. It pays a predefined lump sum should the insured person dies within a set amount of time. With the insured person's death, term insurance will dole out the surface value of a policy out to the beneficiary on the policy. Every premium that is put forward is used to go to pay for the cost of insurance protection.
A term life insurance policy can last between one and 10 years, but it can go up to 20 years. They are relatively cheap, coming in at just about $30 for someone in his mid-thirties that doesn’t smoke. The top characteristics pertaining to term life insurance are the following:
- Zero cash value
- Renewable after the term expires
- Sometimes can be converted to a permanent life insurance policy package
Permanent life insurance
Permanent life insurance gives protection for life, but you have to pay all the premiums in a timely fashion. It doesn’t expire either, and it is often linked up with either a savings or investment account that can be joined with the insurance protection. This addition makes premiums go higher, but it’s worth it.
The main features of permanent life insurance are the following:
- Permanent protection for life
- A lot more pricey to keep
- Stores up cash value for a rainy day
- Loans can be taken out with the policy
- Good tax treatment on policy earnings
- Stable premium levels
There are a few tips and tricks you can utilise to get maximum insurance coverage. Consider getting a certain threshold level, called a break point, of insurance because better premiums are offered at flat amounts of $200,000 or $1,000,000.
Make sure that a premium is certain not to increase the life of your policy too. Don’t fall head over heels with riders, either, sometimes they’re not worth the cost.
When purchasing insurance, don’t rush into getting the most expensive premium permanent life insurance possible. Consider if a term life insurance policy will meet your needs. Protect your family in case of a sudden death so that they’ll have peace of mind too.