When you take out life insurance, you rely on insurance coverage to provide your family with reliable financial protection after death. It is good to compare different insurance plans to get better benefits and cover. Before you get the insurance policy, you need to make sure why you want it.
- Have you bought a new house and you want your family to pay out the mortgage after you die?
- You want the policy to cover for your children while they are growing up after you are gone.
- Do you want to leave an inheritance for your family with the policy?
- Or you want to cover your funeral cost with a lump sum amount given to your family.
Make sure to be certain about what exactly you want and then get the insurance policy for your life.
Who should buy life insurance?
Life insurance gives financial support to the family or other beneficiaries after the death of the person who is insured. Here are some common examples of people who may need insurance:
- Married couple who rely on pension.
- Families who cannot afford funeral expenses.
- Rich families who owe taxes to the estate.
- Parents who wants to provide for their minor children after they are gone.
- Parents who have adult children with special needs.
- Young people who wants to clear the student loan took by their parents for them.
- Businesses with important employees like CEO.
- Young and healthy adults to take the advantage of low premium cost.
Different types of life insurance
There are many different types of life insurance to cover different needs and preferences. Let’s take a look.
- Level term premiums are same for every year.
- Term life is the insurance policy in which you choose when to end the policy.
- Increasing term policy changes with you age. its premium is low when you are young and it increases as you grow older.
- Single premium is the policy in which policyholder pays the complete premium in a single payment.
- Permanent policy is the one in which the policyholder pays the premium throughout his life unless the insured surrenders the policy or stops paying.
- Funeral or burial expense is the permanent type of insurance that has death benefits.
- Whole life is a type of permanent insurance that expands cash value.
- Universal life is a permanent insurance with a cash value, the universal life insurance has premiums that are comparable to long-term life insurance.
- Variable Universal is the one in which the policyholder is permitted to invest the cash value of the policy.
- Guaranteed Universal is a type of universal life insurance that has no cash value and usually has lower insurance premiums than whole life.
- Indexed Universal allows the policyholder to earn a fixed amount of return on the cash value.
How much Insurance you should buy?
Before applying for life insurance, you should consider your financial situation and decide how much money is needed to maintain the living standard of the beneficiary or to meet the needs for which you are buying a policy.
For example, if you are a primary caregiver and have children between the ages of 2 and 4, you want sufficient insurance to cover your custody responsibilities until your children are older and can feed themselves. You can investigate the cost of hiring a babysitter and a housekeeper, or take advantage of childcare and cleaning services, and then possibly add money for the education. Add how much these costs will be over the next 16 years, add more inflation, and this is a lethal gain that you may want to buy if you can afford it.
Tips to Consider Before Buying Life Insurance
Before buying the life insurance you need to understand the basics of insurance. Here some tips for you to consider before buying the insurance for your life.
Need of time
You may think you don’t need insurance for your life now, but things can change at any time. You get married, have children, lose your job, or buy a house so you may think that you should have considered it before. You never know where life can take you, so it is better to have a plan like insurance.
Never buy insurance without understanding it
Any sort of insurance is a contract between an insurance company and a person. There are many requirements that both parties have to meet, and there are many technicalities in it. So you need to understand what you are buying. Read the insurance contract carefully before signing it because it is as important as signing a business contract.
Don’t completely rely on insurance agent
Insurance is just like a product that a company sells with the help of agents. We are not saying that these agents are dishonest or anything, it is just they mostly agents try to sell one type of life insurance that is whole life. So you need to do some research and understand what you want and what suits you the best.
Insurance VS Investment
Whole life insurance is similar to an investment deal and can be more expensive than long-term insurance. This generally means that many Americans who buy life insurance cannot pay enough to cover what they need and are ultimately not sufficiently insured. As with any investment, the return that sales agent pitch you are just the marketing tactics. The bottom line is that there are so many ways to invest and grow your money today that whole life policy is never an ideal way to invest. You need to understand the ground to make sure you are making the best decisions with your money.
Decision to buy Insurance
It is difficult to cope with the loss no one wants to think about what will happen to them and their loved ones when either of them dies. It is depressing, and you may feel paranoid. Although it would be easier to put your age and income on a calculator and get an answer about what insurance to buy, there is no magic bullet. Only a detailed analysis of your situation and options can give you the best answer.
You buy life insurance to make sure that after you are gone your loved ones stay secure. Each policy is unique for the insured and the insurer. It is important that you read your policy document to understand what risks your insurance policy covers, how much your beneficiaries will get paid, and under what circumstances. Do some research before buying any insurance policy.