Life can be complicated. The older we get, the more complex it can become: more assets, more dependents, more decisions to be made in the event our own lives are unexpectedly cut short. If you were suddenly gone tomorrow, would your family be financially secure without your income? The answer may depend on two simple words: life insurance.
Though it’s not a fun topic to dwell on, life insurance is important to understand. What is it? Who should have it? Why? What type? Am I set for life if I already have a life insurance policy? These are all critical questions that deserve a clear understanding and frank discussion.
A life insurance policy provides financial protection for your loved ones when you pass away. Simply stated, it is a contract between a policyholder and an insurer in which the policyholder pays regular premiums to the insurer and, in the event of the policy holder’s death, the insurer provides a monetary benefit to the policyholder’s designated beneficiary. This lump sum can help ease financial burdens like loss of income, funeral expenses, and more in the event of the policyholder’s death.
It’s inaccurate to think only household breadwinners need life insurance. Ask yourself whether your passing will impact others’ finances. Here are a few examples of “yes” answers:
If your passing would negatively impact your loved ones’ financial stability in any way, you should consider some type of life insurance policy.
Once you determine that a life insurance policy is in your best financial interest, the real work begins in deciding which type. There are two main types of life insurance:
Ultimately, when shopping for life insurance, you want to find a balance between adequate coverage and affordable premiums. If you’re unsure of how much coverage you need, an experienced insurance agent can help you assess your coverage options and related premiums.
While some life insurance can be quite pricey, it’s surprisingly affordable in many cases, especially for younger, healthy individuals interested in term life insurance policies. A healthy, non-smoking 30-year-old male may pay as little as $500 per year or less for a term life insurance policy with a $1 million death benefit. Smokers or those with health problems are likely to pay twice as much or more. It all depends on age, current health and lifestyle profile, as well as coverage level.
Life insurance is not a “get-it-and-forget-it” commitment. As our lives change, it’s possible our life insurance policies should, too. If you’ve moved into a bigger home, for example, did your mortgage payment stay the same? If it’s significantly more, you may want to look at a policy with a higher death benefit. If you’ve made significant lifestyle changes such as dramatic weight loss or reversed certain health conditions like Type 2 diabetes, you may qualify for a better policy rate.
If you have a term life insurance policy, be sure you know the term and when it expires. If your term is set to expire, you have options to consider to continue your coverage into the next decade and beyond. Many policies offer various options when set to expire. These can include converting the term policy to a permanent policy; replacing the term policy with a less expensive one; paying a renewal premium; or decreasing your death benefit. Your age and health status will likely determine which option makes the most sense.
No matter your age or stage of life, life insurance options are available. When it comes to navigating the maze of life insurance options available, an insurance expert can help you take the right path given your specific goals and circumstances.