Should I Buy Life Insurance
If you have dependents who rely on your financial support, life insurance may be worth considering to ensure they are protected if you unexpectedly pass away. This article will take a deep dive into what life insurance is, if you need it, and how to calculate the right amount of coverage for your needs.
should i buy life insurance
Term life insurance and permanent (whole, universal, and variable) life insurance are the two primary types of life insurance. As the name implies, term life insurance provides coverage for a specific term or amount of time, usually one to 30 years or longer. By contrast, permanent or whole life insurance provides coverage for your entire life. Because term life only lasts for a specific period and carries no cash value, it is usually more affordable than a permanent life insurance policy.
Term life insurance offers coverage for a particular time frame, such as 5, 10, or 20 years. When you buy a term policy, you lock in your premium rate and death benefit for the term you select. If you die during the term, your beneficiaries will receive the death benefit, provided that regular premium payments have been made. If you die after the term expires, the insurer will not pay out the death benefit.
Generally speaking, the longer your policy term is the more expensive your premium will be. Premiums also become more expensive the older you get. On average, a 20-year-old will pay less than a 40-year-old for the same term life insurance policy, according to our data.
Whole life insurance, also known as ordinary life insurance, provides coverage for your entire lifetime. This type of permanent life insurance policy comes with a cash value component that can accumulate value on a tax-deferred basis. However, the actual value of the account may differ depending on the insurance company. For example, some companies may base the accumulation on premium payments (minus expenses), but others may not.
With a whole life policy, your death benefit and premium amounts will usually remain the same. However, like with other life insurance policies, the older you are when you purchase insurance, the more coverage will cost.
The cost of an insurance policy depends on a number of factors, including the type of policy it is and the amount of coverage you want. Other variables that insurers take into consideration when setting policy premiums include your age and gender, your present health and medical history, whether or not you use tobacco products, and your current occupation, among others. You may be required to take a medical exam or answer a questionnaire about your health and lifestyle before you can buy a policy, depending on the insurer and coverage you choose.
There is no one-size-fits-all solution, but there are several ways you can estimate the amount of coverage you need. Below are three common methods for estimating your life insurance needs. If you still have questions, it may make sense to consult a licensed financial advisor.
The information in this resource center aims to familiarize you with basic life insurance terms, describe the major life insurance policies and annuities that are available, and provide important shopping tips to help you make the right choice when purchasing life insurance or annuities.
Your need for life insurance will vary with your age and responsibilities. The amount of insurance you buy should depend on the standard of living you wish to assure your dependents. You should consider the amount of assets and sources of income available to your dependents when you pass away. Social security benefits, available cash and other sources of income and investments may not provide the standard of living you have in mind. Life insurance helps bridge the gap between the financial needs of your dependents and the amount available from other sources, is the amount to be provided by life insurance. Your agent or other financial advisor can help you with these calculations. The Internet, as well as many financial magazines, books and articles are available to help you as well.
The purchase of life insurance is an important decision for both you and your family. There are many reasons why life insurance is purchased, but these reasons should be based upon your needs or wants. Your marital status, number of dependents, family size, income, and wealth all play a role in determining the amount of life insurance that is right for you. The first step is to determine your current need for life insurance and how much you can afford to spend. It is a good idea to consider future needs too, because unlike most purchases, you can't always buy life insurance when you need it; you have to be in reasonably good health to purchase most types of life insurance products.
Remember if one kind of life insurance does not seem to fit your needs, ask about other plans. Be sure to read your new policy carefully, and ask the agent or company for an explanation of anything you do not understand. Take full advantage of the free look provisions that are provided on the policy cover page. New York requires a minimum free look period of 10 days and a maximum of 30 days. A 30-day free look period is required for any policy offered through the mail. "Free look" provisions allow you to cancel a policy without penalty within a set time period. Whatever you decide, it is important to review your life insurance program every few years to keep up with your changing financial and family circumstances and responsibilities.
When selecting an insurance policy, you are also selecting an insurance company and you may wish to know how stable that company is financially. Many firms rate the financial soundness of insurance companies. Some provide the ratings free while others charge a fee, ranging from a small fee for an online rating to a larger amount for quarterly reports. Each firm has a different rating scale and firms may differ in the conclusions they reach about a specific insurance company. Therefore, you may wish to check with more than one firm before selecting an insurance company.
In exchange for regular payments made over time to an insurance company or through an employer, people you designate as beneficiaries get an agreed-upon sum when you die through your life insurance policy.
There are two main kinds of life insurance, offered in a variety of forms: term life insurance and permanent, or whole life insurance. Term life insurance offers coverage for a set period of years. Permanent, or cash value, covers your entire lifetime (premiums can cost more).
Either form of life insurance will provide financial protection for you and your loved ones. So, if you don't have life insurance, or want to supplement what you currently have, it's worth exploring your options. Get started with a free price estimate today.
Term life insurance, for example, is applicable to certain time frames, or terms, of the insured's life. It's often cheaper than other insurance types but it will need to be renewed when the term expires. Whole life insurance, meantime, is more expensive but it lasts for the duration of the policyholder's life. It also has a desirable cash-out option.
But when is a good time to actually buy life insurance? In general, experts say the earlier the better - but it also pays to examine your specific needs like dependents and individual financial situation. Consider your whole financial picture and future needs.
You may have dependents, bills and other expenses you still need covered. Or, you may want to leave an inheritance. There are multiple advantages to having a life insurance policy in place, regardless of the type you choose.
Despite conventional wisdom, life insurance for older adults can still be valuable and cost-effective. And, if they're concerned about taking a medical exam they can skip it altogether by going the no-exam route. Get a price estimate now and learn more!
The timing of your life insurance purchase will be influenced by all the factors listed above. Who you ultimately list as your beneficiaries will also be affected by timing - specifically, the goals you had at the time the policy was purchased.
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Life events and milestones sometimes impact the decision to consider life insurance coverage. It is a good practice to consistently review coverages when these occur. This assures that coverages are current and are opportunities to verify or update beneficiaries. People typically make decisions and changes on life insurance after life events such as a marriage, the birth of a child, adoption, divorce, remarriage or death. A few other times are described below.
Perhaps you would like your legacy to help the next generation live more comfortably. There are a variety of ways that life insurance can help you do that. Life insurance can continue your contributions to your favorite charity, because some policies allow you to name an organization as your beneficiary. You can also use life insurance to help protect relatives who depend on you or those with special needs by naming them a beneficiary. You can determine how to divide your assets by specifically designating them to your heirs.
The information in this article was obtained from various sources not associated with State Farm (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information. 041b061a72