Most people avoid thinking about life insurance because they don’t want to think about their death, or the death of a family member. It is more than reasonable for conversations about life insurance to be a bit uncomfortable. Fortunately, the process of choosing life insurance does not have to be uncomfortable or overwhelming.
First, think about this question – “If you were not around to provide for your family, would they suffer financially?” If the answer is “yes”, then you should consider getting a life insurance policy. Not sure where to begin? The first step is knowing which type of life insurance is best for you. Let’s take a look.
There are two primary types of life insurance – “term” and “whole life” insurance policies. These policies offer the following:
A term life insurance policy will cover you for a specific amount of time. Most often, these policies are sold in increments of five years. This is a good option for people who have a major life event coming up soon, at which point they will no longer need the policy. Examples include a child graduating from college, marriage, or divorce.
With term life insurance, the process is simple. You pay a premium, and if you die, the policy will provide a fixed amount of money to the person(s) listed as beneficiaries. The downside to term life insurance is that if you die outside of the coverage period, those benefits are gone. They are only active so long as you are paying monthly premiums under your policy guidelines.
Whole life insurance, sometimes called permanent life insurance, is a type of coverage that lasts for as long as the premiums are paid. Whole life coverage policies often accumulate cash value, as well as offering coverage based on the policy. Whole life insurance is a good option for people who believe they will need insurance when they are older.
With whole life insurance, you are accomplishing two things – you have life insurance coverage, and you are financially investing in your future. With a whole life policy, a portion of your premium payments goes into an account that will accumulate. As long as your policy is active, you may have the option of cashing out that money.
Choosing the right life insurance for you will depend on a variety of factors. To help you determine which type is best for you and your family, consider these questions:
Is my spouse self-sufficient?
Does my spouse or children have savings accounts?
Will my spouse receive Social Security benefits when I die?
Who will pay for funeral expenses when you die? Are they capable of doing so comfortably?
How will taxes impact the benefits my family will receive?
How much life insurance do I need? Consider your cost of living and future needs of beneficiaries.
Whole life insurance may seem daunting and uncomfortable, it is a smart step to take to make sure that your family is well taken care of if you are no longer around.
There is a lot to consider when it comes to life insurance. Still not sure which type to choose? You may find it helpful to speak with an independent insurance agent about your concerns. An insurance agent can review your current and future financial goals and the types of life insurance available, and can offer guidance on the best policy for your needs.