Learn the ins and outs of types of life insurance and how to select the right insurance for you and your family.
The Top Line
- Life insurance is recommended for anyone who has dependents that rely upon their income for living expenses.
- There are two basic options for life insurance--whole life insurance and term life insurance. The choice of which one is the best comes down to the individual and their risk tolerance.
- Life insurance is a very affordable measure that you can take to ensure your dependents have funds to cover their needs in the event that you pass away.
- There are many factors to consider when it comes to picking life insurance. Make sure you weigh what is important to you when choosing life insurance.
If you have children or dependents, you have probably considered getting life insurance at some point. You may even have life insurance right now. However, there is a lot to know about life insurance to guide you to selecting the right type of insurance and for an appropriate amount. If you want to get the most out of life insurance and enjoy the benefits that it is designed to provide, then you need to know the life insurance basics. The basics of life insurance are relatively easy to understand.
This guide will show you much of what you need to know when it comes to the basics of life insurance and how it relates to your life and livelihood. Following this guide, you’ll know what you need to know and ensure that your search for life insurance is successful.
What Is Life Insurance?
If you are not familiar with what life insurance is or how it works, then that will be the first step in getting the most out of your life insurance. Life insurance acts much in the way that home or car insurance does in that it secures the financial future of the beneficiary in the event that the asset (your life) is lost. Life insurance will pay out an amount to the beneficiary if the policyholder were to pass away. This is a measure that is aimed at providing financial security and safety to those who depend on others for income. Most commonly, people take out life insurance policies to provide their spouse and children with income security if they were to pass away.
When Should I Get Life Insurance?
A common debate that people have is when you should get life insurance. Many people will claim that it’s only important to get life insurance when you have a spouse and children, or others who depend on your income. However, this isn’t always true. The truth is that it depends on a few factors. The primary factor being what type of insurance you are looking to get.
For whole life insurance, it may be best to get it as early as possible. The reason is that it could allow you to lock in a more favorable rate since you are young and at less risk. Those who aren’t at as much risk will have access to better rates, meaning your life insurance could end up being more affordable now than it ever will be in the future. If you want to get the most out of your whole life insurance, it may be best that you enroll as soon as possible.
For term life insurance, however, it’s a slightly different story. Since you will not have this insurance policy your entire life, you cannot depend on the certainty of a lower cost. In this case, it may be best to wait until you do have a spouse, children, or other dependents.
How Much Does Life Insurance Cost?
The cost of life insurance ranges depending on a few considerations. However, there is an average monthly cost associated with life insurance. The average life insurance policy costs about $26 a month. However, this can vary according to some factors. These include the term, your age, your health, and other factors that increase or decrease the likelihood of the policy paying out. In general, life insurance is a pretty affordable type of insurance to carry.
What Types of Life Insurance Are Available?
There are many different types of life insurance that are available. You should carefully consider all the different types of life insurance that you can get before you choose one. This will help to ensure that you get the right form of life insurance for you and your family. Here are the two most common types of life insurance.
Term Life Insurance
The first type of life insurance and probably the most common type of life insurance is term life insurance. Term life insurance is life insurance that is valid for a specified period of time. At the outset of the policy, it is defined how long you will be covered. This policy expires after that period of time and is no longer valid.
Whole Life Insurance
Whole life insurance functions in much the same way as term life insurance in that it covers your life and insures your income. However, there is a difference in how long this type of insurance will cover you. A whole life insurance policy, as implied by the name, covers you for your entire life. Many people prefer this type of policy since it provides added security and certainty to their life and their income. Whole life insurance is more expensive than term life insurance for the same coverage amount.
When you are deciding on a life insurance policy, you should pay attention to key aspects of the life insurance policy. Here are some of the main factors that will help to determine which life insurance policy and company you should choose for your policy.
The main decision that you will have to make is the term. If you are not selecting a whole life insurance policy, you will need to determine the term that you want for your ideal term length life insurance policy. They typically come in 10, 20, and 30-year policies.
Another factor that you will want to take into consideration is the payout that you need from your life insurance policy. You should sit down with a financial advisor to determine this amount, but many like to consider it essential that you get a life insurance policy that pays out an amount that would allow any dependents to live comfortably and pay all applicable bills. A general rule of thumb is to select a payout that is ten times your annual income. To make the amount more specific to your circumstances, consider your spouse’s income, how much you will need to pay for your children’s education, how much your annual expenses are now, and how much you will want to support your spouse in retirement.
When purchasing life insurance, a key factor that you should take into account is your risk tolerance. Those with higher risk tolerance can afford to take out a smaller life insurance policy whereas those with a low risk tolerance and need for security should invest in a more robust life insurance policy that pays out more.
Financial Security of the Provider
When considering life insurance, research the financial stability of the provider. You will want to select a company that is financially secure. It helps to review ratings of insurance companies so that you are likely to choose one that will remain in business throughout your lifetime.