Insurance is not an investment but it is an essential part of sound and savvy financial management. Insurance is protection. Insurance protects all the hard work you have put in. It provides protection for your spouse in case of premature death. It sends your children to college. It keeps a family together when money shouldn’t be a concern.
Insurance is essential. However, finding the right coverage to protect your assets and family members can be difficult. It can be difficult to find the right coverage for you. There are many insurance products available: term life, whole life and universal life.
Here are some tips to help you get the best life insurance for your budget and still provide the protection that you and your family require.
Types of life insurance
There are two types of basic life insurance, with many variations.
Term life insurance is easy to understand. It is also the most affordable protection you can purchase.
Term life insurance pays when you (the insured) die within a specified time frame. This is the length of your term life insurance coverage. Term life insurance is available in a range of terms: you can choose from five-, ten or thirty-year terms.
The monthly premium is calculated based on how much protection you need each month. Two factors are used to calculate premiums: your age and general health, as well as the amount of protection that you require. It’s easy. Because you are purchasing less protection, a $100,000 term life policy will cost you half as much as one that is $500,000
Term life keeps things simple. The insurance company pays X dollars to the beneficiaries if the insured person dies, provided that the policy is still in force. This is why term life insurance is called term insurance.
Term life policies are not able to accumulate value and you cannot borrow against them. If you select a short-term policy and your health changes, it could mean that you pay more for your term insurance than if your long-term policy covers you for the long-term.
Add up the funeral costs, your mortgage debt, and any other large expenses that could drain your family’s resources to determine how long you will need. It is possible to estimate the annual cost of your family’s funeral costs.
Add a factor between 5-10 to the equation. If you don’t have much debt, use the lower factor. The higher factor is for people with multiple mortgages or who have three children to educate. This is how long you can afford to protect your family’s expectations and their future.
Whole life insurance can also be called universal insurance, permanent insurance, variable insurance, universal insurance or other product names. However, all of these insurance types fall under the umbrella of whole life insurance.
The difference between whole life and term is that whole life covers your life from the time you purchase the policy to the moment you die. This assumes you will pay your entire life insurance premium each month. The term coverage (the length of the policy) is not applicable to your whole life. You can save money by buying it young. Your premiums will be lower and you will start to build cash value.
This is the main difference between whole and term life insurance coverage. Whole life pays dividends. While not a lot, dividends can be used to lower monthly premiums or to accumulate interest.
After the cash value of your whole life policy is sufficient, you can borrow against it to purchase a home or pay tuition bills. You can’t take out loans against the whole-life policy’s value. This is because it reduces the payout to the family in the event that the insured person dies.
A whole-life policy can increase in value and provide protection for your family. Coverage is also more expensive. You will pay more for $500K whole life insurance than $500K term life insurance. This is because the insurer charges interest on your monthly premiums.
Use the above criteria to calculate your coverage requirements. Your whole life is not a money-maker. It is not designed to increase your wealth. This is a side benefit. A side benefit is important, but it’s not the main reason to purchase whole life. It protects your family in case of your premature death.
Sources for Life Insurance
There are many insurance companies, and even more life insurance products. Talking to a professional is a great first step.
A broker can help you, but each broker only carries a small number of products from limited insurance providers. Each broker will be able to tell you which products are best for you.
You can do the math yourself and know how much coverage you need. Then, it’s just about finding an insurance company that offers the rates you desire and the benefits you are looking for.
Your local bank is another resource – it’s often the best place for you to begin researching your life insurance requirements. Because insurance is not the main business of banks, banks can offer a wide range of life insurance products. You’ll be able to find straightforward answers to your questions because they don’t sell insurance.
You should also visit your bank’s representative for insurance. They will know your financial information, such as how much money you have in bank accounts, how much goes in and out each month, and your tax status. This will help you get the right type of life insurance at a fair price.
Talk to your employer. Talk to your employer. While life insurance is a benefit that includes health care and two weeks vacation, you might be able increase the amount of coverage by having money taken from your paycheck.
You can also find low-cost whole or term life coverage through unions, associations, the local Chamber of Commerce, and other organizations. For example, purchasing life insurance through an industry association will get you more coverage for a lower monthly cost. However, you don’t usually have the option of choosing from multiple insurers when you buy term or whole life insurance through your union. This is something to be aware of.
Choose an insurance company that is highly rated by Standard and Poor, or another rating agency. Your banker or broker will help you to find the best coverage possible so that you get more value for your money.
Although life insurance can sound complicated, it is easy to understand when it is broken down. A trusted advisor will help you find the right path.
Get life insurance. If you are looking for lower premiums, you can choose to get term life insurance. You can also opt for whole life if your insurance is designed to grow cash value that you can borrow against.
You have the choice. The right choice will save you money and give you the peace of mind only high-quality life insurance can provide.
It’s not something that anyone likes to consider buying life insurance. It’s depressing. It is also important to protect your assets and family. Which type of life insurance is best for you? Before you talk to an agent or company about insurance, here are some things to consider.