Life Insurance: what can you really do with it?
Who needs life insurance
Types of policies
Once you’ve decided on a policy, you have to decide what type of policy is right for you. There are three main types of life insurance policies, each offering different benefits and costs: time period lifestyles insurance, whole existence insurance and universal life coverage. Term policies are generally inexpensive but offer lower coverage amounts. Whole life policies tend to be more expensive up front but provide more consistent coverage over time.
How to buy it
Buying life insurance is fairly simple and relatively inexpensive, especially if you are young and otherwise healthy. Most life insurance policies are designed to cover a loss of income in case of death. They can be useful for providing a safety net for dependents or people who have loans that need to be paid off should something happen to you. If you have a family, it might be helpful for your spouse or children to have some kind of financial support after your death. (You may also want additional coverage if you own a business.) Life insurance policies typically cost between 1-10% of their face value each year, depending on factors like your age and health status.
When to use it
A life insurance policy can be used to cover funeral expenses, pay off mortgages and other loans and provide financial support for your loved ones after you pass away. There are other uses of life insurance but most policies will have a section explaining what is covered. Make sure you read that before purchasing one so you know exactly what it will do for you. If you can’t find it in there or aren’t satisfied with what it says, ask your agent and look online for more information.
When not to use it
Life insurance isn’t always a good idea. If you have very little in savings and only a small mortgage, it probably won’t make financial sense to buy life insurance. In fact, even if you have quite a bit of money saved up, or have big investments or other assets that would be hard to manage without your income–it might not make sense for you either. Life insurance can be expensive, so before deciding whether or not to buy coverage, be sure to weigh how much it will cost against how much peace of mind it will bring you–and also think about what other kinds of emergency funds you already have in place.
Questions to ask before buying it
1. Am I overpaying for my policy, given my age and health status? 2. Am I paying for a lot of features or riders that I don’t need or won’t use? 3. Are you locked into your current provider because of a long-term commitment, like through your job or credit card bonus point program? 4. Is there anything else out there that makes more sense than what you currently have in place, such as term life vs.
Tips for getting the best policy
If you already have a policy or are in a position to buy one, it’s important to understand how that investment can help protect your family if something happens to you. The most obvious purpose of life insurance is to replace lost income. If you were earning $50,000 a year and died prematurely, your family would probably struggle financially unless they also had some other source of income–inheritances are notoriously unreliable. But life insurance goes beyond just replacing lost income. Here are some other key benefits of life insurance
How much should you get?
how lots will it cost me per month?.