Life insurance is designed to replace lost income or pay for special needs your family would have if you weren’t around. The big questions you need to ask are: Do you need it? And if so, what kind should you get?
Do You Need It?
If you have a spouse, kids, or aging parents who depend on you, life insurance is a good option to consider.
If you’re a wage earner, you’ll want to replace your salary plus provide for any additional needs, such as paying off the mortgage, college tuition or career training for a spouse who may be reentering the work force.
Would your working spouse want to take some time away from the job to be with the kids after a loss? If so, what would that cost?
If you’re a stay at home parent, look at what it would cost to hire help to perform tasks you routinely do (day care, housekeeping, financial management, cooking, grocery shopping).
If you’re caring for a family member with special needs, what would it cost to make sure that person is provided for if you die?
If you’re at or near retirement, how would your spouses income change if you were around, or vice versa? If all or most of your pension or retirement savings would be accessible, you might not need life insurance.
What Kind Should You Get?
Term is the simplest form of insurance to understand and the type most financial experts recommend because it allows you to purchase the most coverage for the least amount of money. Purchase a policy for a specific amount that will covevr you for a particular time period (or term).
Term Universal Life
A new hybrid that offers more flexibility than a term policy. Term UL lets you extend the term of the policy after you are in the plan. Unlike term, you can choose rom 10 options, tailoring the policy to your current financial state.
Rather than covering you for a part of your life (as with term), whole life will cover you for your entire life, as long as you can keep up the premiums. Whole life coverage is more expensive than term, and part of the premium will be set aside in an account designed to help cover the cost of the premium as you get older.
A blended life insurance policy starts out as a combination of term coverage and permanent coverage. Future dividends paid on the policy are used to convert the term coverage into permanent coverage.
UL covers you for as long as you make the premiums, and contains an investment component. Beneficiaries either receive the face value or the face value plus the cash value of the investment account. The face value can rise and fall with the value of investments.
Similar to universal variable life, but usually offering more investment options, including stocks, bonds, and mutual funds. The face value will rise and fall with the value of the investments.