What is life insurance?
Life insurance helps you protect the people you love financially if something ever happens to you. It helps cover college tuition, mortgage payments, funeral expenses, and more. You do not want your family worried about money while mourning your death.
Different types of life insurance
There are 2 main types of life insurance:
Term life insurance policies typically last one to 30 years and cover your loved ones if something suddenly happens to you within that time frame. Whole life insurance lasts your entire life. It comes with a savings account called "cash value" which grows a certain percentage yearly.
What type of life insurance is best for me?
Term life insurance is the most common. It's more useful to have for young families still paying off debts (kids' schooling, mortgage, and car payments). It helps pay for these debts if something happens to you and is also 3- to 10-times cheaper than a whole life policy.
Whole life insurance can be proper to have if you have a lifelong dependent, such as a special needs child who will most likely always be reliant on you for their care. It's also a great option if you want to utilize your retirement savings and still deliver an inheritance to down to your family.
When is the best time for me to purchase life insurance?
The earlier, the better. Why? Because premiums are lower for younger people and stay the same throughout the entire policy period.
A particular life milestone is also an excellent time to think about life insurance. A new mortgage payment is an excellent reason to get covered. If something unexpected happens, your family is not left with the huge of task of paying all of the remaining mortgage payments.
How much life insurance do I really need to purchase?
It depends on your family and boils down to a variety of factors, such as your:
Annual salary
The amount of years your family may need it
Remaining mortgage balance
Children's future college tuition
Living expenses (auto payments, credit cards, etc.)
To do the math, subtract all of these variables by the savings you already have. For example, existing college funds, your 401(k), and other savings accounts.
How can I get better life insurance rates?
Buy it when you're young and healthy. You will get a lower premium, which stays the same throughout the entire policy period.
Also, it is essential to re-evaluate your needs frequently. Once you pay off the car, mortgage, or kids' college tuition, you may no longer need the same amount of coverage. Plus, as your savings grow, necessarily you can start decreasing your coverage along with the premium.
What is the best age to purchase life insurance?
Here is a word from the wise. You are never too young or cool to purchase life insurance. However, most young people have student loans and other debts at the top of their minds, not life insurance.
But when a family enters the equation, life insurance should become top of mind. And for young families, term life insurance might be right up your alley.
How many years should I get or keep Term life insurance?
What is the length of your mortgage term?
When will your last child graduate college from college?
When does your partner or spouse plan to retire?
What are your car payments?
Do you have unpaid student loans
What much money do you have in savings?
Primarily, life insurance should reflect all of your debts. As you pay them off or down, you can begin reducing your coverage.
How frequent should I review my life insurance policy?
Every time you reach a new milestone, revisit your life insurance, such as taking out a mortgage on a new home. At that point, you should purchase a policy that covers the remaining balance on your mortgage to help ensure your family doesn't have to carry the costs alone if something unexpectedly happens to you.
In short, review your life insurance policy frequently. Once that mortgage is paid, and you are pleased with out savings account, it's time to consider reducing coverage (and your premium).
WRITTEN BY
Steve Leach
CEO and Co-Founder of linqrs mobile app, The Most Clever Way to Shop for Insurance. Former Insurance Agency Owner, College and NFL football coach.
linqrs is downloadable in the Google Play and the App Store.
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