Who Should Consider Life Insurance
The benefits of life insurance are something that everyone should consider. People generally don’t start planning for life insurance until they advance in age, but there are legitimate benefits to exploring life insurance options at a younger age.
Life insurance rates increase as you age, so can be a cost-effective way to both obtain insurability and plan for the future.
Individuals with underlying health conditions, family histories of health issues, or those undergoing life changes such as buying a house, starting a family, or changing careers should also consider the benefits of life insurance as a means of protecting themselves and their family through the uncertainties of the future.
There are also numerous options available for insuring the youth in your family such as Child Rider additions to your policy or Juvenile Life Insurance policies like the Gerber Grow-Up Plan.
What Is Whole Life Insurance For Seniors
While seniors may qualify for a variety of policy types depending on their age and health, final expense policies are often referred to as senior policies. Thats because theyre available to those who are too old or in too poor health to buy other insurance. Even those in their 70s can find coverage, with many policies only requiring a brief health questionnaire rather than a physical exam.
Cons Of Term Life Insurance
When you buy a term policy, all of your premiums go toward securing a death benefit for your beneficiaries. Term life insurance, unlike permanent life insurance, does not have any cash value and therefore does not have any investment component. If you’re still alive when the term ends, the policy simply lapses and you and your beneficiaries don’t see any money.
However, you can think of term life insurance as an investment in the sense that you are paying relatively little in premiums in exchange for the peace of mind knowing that in the event of your death, your beneficiaries will receive a relatively large death benefit.
If you are interested in a policy for a fixed period with a built-in savings mechanism that rewards you for your payments later on, a return of premium life insurance policy may be an attractive option. You’ll pay a flat rate for the duration of your policy, but unlike traditional term life insurance coverage, you’ll get all your money back at the end of the term.
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What Is Life Insurance And How Does It Work
13 Minute Read | December 30, 2021
So youve got your home and auto insurance policies set up and crossed off your list. But what about life insurance? If you havent gotten around to it yet, youre not alone: 61% of Americans dont have life insurance in place.
Think about that number for a minute. Imagine how many millions of people financially depend on someone who has no life insurance coverage. It’s a risky situation because if that provider dies, their loved ones will be in a really bad place financially.
Maybe getting life insurance is already on your radar. Or maybe it’s notbecause life itself is just so busy! If you have loved ones who depend on your income, its worth knowing how life insurance can protect them if anything happens to you. Heres what you need to know about life insurancehow it works, what it costs, and which type is right for you.
What Type Of Life Insurance Should I Buy
This is a question that we are asked quite often. The type of life insurance that you should purchase depends on why you require life insurance.
If your need for life insurance is temporary, such as protecting your family, covering debt or any outstanding loans you should consider term life insurance.
If you are requiring life insurance for estate purposes, taxes at death, funeral / final expenses, looking to leave a legacy or inheritance then you should be looking at whole life insurance which will last your entire life. We recommend speaking with one of our licensed brokers before purchasing.
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The Point Is For Your Policy Not To Pay Out
If you outlive your term life insurance policy, thats a good thing. As Root noted, the goal is for term life insurance NOT to pay out you don’t want to die early.
All that being said, choose the life insurance plan that is best for you. You can compare life insurance quotes for term policies online, or speak to a trusted financial advisor to understand the costs of permanent life insurance if you decide thats a better fit.
About the author:Eric is a former insurance writer at NerdWallet.Read more
There Are Tax Benefits With Life Insurance Thats Right You Heard Us Loud And Clear
Now, lets cut to the chase one of the most valuable benefits of a life insurance policy is the plethora of tax advantages they can provide to the policy owner. For example, beneficiaries can receive the death benefit tax-free in the event of the policy paying out.
All life insurance policies provide tax benefits of some sort, but theres some nuance to each offering.
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Types Of Permanent Life Insurance
The common types of permanent life insurance policies are:
Whole Life Insurance
This type of permanent life insurance is the most common and offers fixed death benefits that include a cash value, which will grow at a guaranteed rate of return.
Many of these types of policies will pay out dividends that are useful in reducing your premium payments. That, or they can add to the cash value.
The element of savings you benefit from will grow based on the dividends the insurance company pays to you.
Universal Life Insurance
This is a more flexible option in comparison to whole life insurance policies. Youre able to alter premium payments and the death benefit. It does last the rest of your life if you continue to pay premiums.
Universal life insurance brings together the benefits of a permanent policy and tax advantages. The cash value builds up when you choose an indexed universal life insurance policy.
These types of policies will usually have sub-accounts for investing that you can manage yourself. You can choose how much you want to pay and mix up your investments that match your risk profile.
As already noted, theres also participating life insurance.
Questions To Ask Yourself Before Buying Life Insurance
Considering purchasing life insurance coverage? Here are some questions you may want to ask yourself before deciding.
Do you have dependents?
One of the primary purposes of life insurance is to provide for children and other dependents in the event of your passing.
Are you married or in a long-term partnership?
Your spouse or significant other is another person you should consider when deciding whether to buy life insurance. If they depend on your income, insurance is probably a good idea.
Do you financially provide for other loved ones?
You should consider purchasing life insurance if you provide for other family members, like siblings or parents.
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Reasons You May Need Life Insurance Even If You Think You Don’t
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.
- Most people don’t consider life insurance until later, but the best time to buy it is early on even in your 20s.
- If you financially support a partner, children, or aging parents, you need life insurance.
- Anyone working a high-risk job or with extreme hobbies is likely to pay more for coverage, but those risks alone are reason enough to get life insurance.
- Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »
Most people aren’t thinking about life insurance in their 20s, but it’s the best time to buy it because most people’s health declines with age. The longer you wait to buy a policy, the greater the eventual cost.
An average 20-something or 30-something nonsmoker can expect to pay between $10 and $50 a month for a term life policy depending on the coverage amount. That’s less than the cost of a gym membership to protect your family’s financial stability in your absence.
How Do I Know Which Is Best For Me
Theres no easy answer to this question. Your best bet is to gather all the facts, and then sit down and think about how they apply to your unique personal situation.
Pros of term life insurance
Simply put, term life insurance can be more affordable, simpler, and less complicated to sign up for. As a result, its the type of life insurance policy that Lemonade offersbecause we honestly think its a solid bet for most people.
With term life insurance, there are fewer moving parts. You have a general idea of how much coverage you want in the case of your passingenough to cover mortgage payments, car payments, or college tuition, for instance.
And you know exactly what time period youll be covered for. Since you set these factors yourself, theres little risk of buying the wrong policyits tailored to your circumstances. And in that case, youre more likely to find that term life insurance is worth it for you.
One downside of term life insurance
In term life insurance policies, there is so guaranteed death benefit, which means that in the likely event that you live past your term, theres no payout, and youre free to apply for a new policy.
Pros of whole life insurance
With whole life insurance, your beneficiaries are pretty much guaranteed to receive a death benefit when you pass on.
A real bonus for policyholders is that whole life insurance builds cash value over time, in case you need to walk away from the policy at any point.
Cons of whole life insurance
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You’re Going To Have A Baby Or Already Have Children
“If you don’t make it home and someone relies on your income to live, you need life insurance,” Mark Williams, CEO of Brokers International, told Insider.
The birth of a child is usually a motivator to get life insurance coverage. Most people get life insurance to cover the mortgage, education, and other expenses so that their family can continue after they die. If you’re planning to have a baby in the next year or so, now is a great time to buy life insurance.
If you’re already pregnant and you’re the breadwinner of the family, it’s possible to buy life insurance, though you’ll probably get the best rates if you undergo the medical exam before or after pregnancy, according to Policygenius insurance expert Logan Sachon.
Before Making Such An Important Decision It Helps To Have The Facts
Understanding the ins and outs of life insurance is one of those chores that always gets pushed to the bottom of the list. And youve probably wondered: Is life insurance even worth it?
If anyone you loved would be placed in financial distress if you were to die unexpectedly, the simple answer is: Yes. There is simply no way to put a dollar value on peace of mind.
Maybe you have enough money put away right now to cover your familys expenses and financial obligations for decades should you pass away unexpectedly.
But if not, paying a modest premium every month to guarantee your loved ones a large lump sum of tax-free moneyanywhere from $50,000 to $1,500,000, with policies offered by Lemonade, which dont even require a medical examdefinitely seems worth it to us.
If you have expenses like a mortgage, your childrens future college education, or other debt that you dont want to burden your family with, a term life policy is a good bet.
Or lets say that you are your childs primary caretaker if you were to pass, how much would it cost to cover full-time childcare? Do you have enough in your savings account to handle those costs?
But before we decide whether Lemonades term life insurance policy in particular is right for you, lets talk about the two main types of life insurance that are out there.
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Provide Peace Of Mind
As stated, the primary purpose of a life insurance policy is so that you know your loved ones your spouse, children or even beloved friends will maintain a comfortable standard of living if you should die. Any type of life insurance policy can help provide this benefit, which is one of the main reasons someone would purchase a policy. The death benefit isnt designed to make your heirs rich, but can help ensure that other responsibilities, such as school tuition and food, can be paid for.
Is Life Insurance A Smart Investment
Using permanent life insurance as an investment might make sense for certain high-net-worth individuals looking to minimize estate taxes. But for the average person, buying term and investing the difference is usually the better option.
Even if you’re purchasing life insurance primarily for investing purposes, it’s still important to research the best life insurance companies to ensure you’re getting the most beneficial policy possible.
Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and reviewed by subject matter experts, who ensure everything we publish is objective, accurate and worthy of your trust.
Our insurance team is composed of agents, data analysts, and customers like you. They focus on the points consumers care about most price, customer service, policy features and savings opportunities so you can feel confident about which provider is right for you.
- We guide you throughout your search and help you understand your coverage options.
- We provide up-to-date, reliable market information to help you make confident decisions.
- We reduce industry jargon so you get the clearest form of information possible.
All providers discussed on our site are vetted based on the value they provide. And we constantly review our criteria to ensure were putting accuracy first.
What Happens When You Die
Sure, life insurance seems like a morbid topic to contemplate, but its also not a decision you can make without due consideration. Your preferred policy is arguably one of the most important choices youll make in this process and it all depends on what exactly youre looking for.
For examplesay youre a multi-millionaire with needs beyond creating financial security for your beneficiaries. Youll likely want to avoid term insurance, instead opting for more permanent options. Inevitably, there will be some opportunity cost when compared to investing this money directly into the market, but the value of securing a plan for the future is truly priceless. Not to mention, permanent policies offer a number of tax mitigation benefits and even an additional wealth-building channel, making them one of the best options for passing on your wealth to future generations.
On the other hand, term policies can still be one of the most straightforward methods for supplementing lost income and are a popular choice for those who havent yet built up a sizable nest egg. In the end, your choice of life insurance is inextricably linked to the kind of life you want your loved ones to have.
Lets dive into both.
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After All Is Said And Done Which Type Of Policy Should I Buy
The truth is there are a lot of things to consider in addition to the type of policy you get. How much coverage do you need? What are all the different policy options ? Is there other coverage I need to protect my family?
Heres an easy way to get answers to all those questions: Just contact Guardian to find a financial professional who will take the time to learn about your unique situation, listen to your concerns, and clearly explain the different insurance options that best fit your needs and your budget from a company thats been helping protect families for over 150 years.
If you are an employee, taking advantage of your benefits at work is a smart and affordable way to get the financial protection you want for yourself and your family. Contact your HR department to review your plan details and determine how much life insurance is available to you. Your employer may provide life insurance as a benefit, or you may opt to pay for additional life insurance through payroll deductions.
Cons Of Permanent Life Insurance
While permanent life insurance can yield several benefits, there are some potential downsides to keep in mind. Cost is one of the most important. Compared to term life insurance policies, permanent life insurance can require you to pay higher premiums. If it turns out that you don’t need insurance coverage for life, you may be paying premiums unnecessarily.
Permanent life insurance could also have tax implications for yourself if your beneficiaries if you decide to surrender a policy or you pass away with a loan outstanding. And taking loans or accelerated benefits could reduce the death benefit that’s paid out to your beneficiaries when you pass away.
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