Obtaining life insurance is a great way to ensure that your loved ones are financially safe should you pass away. But where do you start? There are many factors that go into the decision of buying life insurance. We’ve gathered some of the most common questions about life insurance to help you determine if life insurance is right for you.
What is the purpose of life insurance?
Life insurance gives you protection for your family or other loved ones that depend on you should you pass away. It provides the funds to deal with any financial burdens such as outstanding debts, burial expenses, and pay the costs of administering your estate.
Can I afford life insurance?
Simply put: yes, with the right policy and planning. According to research, a 30-year old male can buy a $250,000 term life policy for as little as $157 a year. With a term policy, as soon as you stop paying you’ll no longer have life insurance coverage. However, with a permanent life insurance policy, you may have payment options in the future as these types of policies have provisions to use cash value or dividends to pay policy premiums.
My employer provides life insurance. Should I buy more?
An employer group policy often provides affordable and simple coverage without a medical exam. However, group policies may be limited on the amount it will pay and it may not be enough to cover your family’s needs. You can learn more about what to look for in your employers life insurance coverage here to determine if it is enough.
Should I get a term or permanent life insurance policy?
It really comes down to your individual circumstances and financial goals/needs. Term life insurance offers greater coverage at a lower initial premium. With this kind of policy, you are covered for a fixed period of time so if you die during the specified term, your beneficiary gets the death benefit. This can be a great option if you have temporary needs or a limited budget. On the other hand, with permanent life insurance, the policy stays in effect for as long as you pay the premiums. This type of policy may make more sense if you think you will need lifelong protection or if you like the idea of accumulating cash value. However, a permanent policy is typically more expensive.
How does Social Security come into play with life insurance?
Often times, Social Security can be a way to replace your income should you pass away. However, Social Security benefits are only paid out if a surviving spouse is over 60 years old or has children under the age of 18. If that situation doesn’t apply to you then it may be worthwhile to consider life insurance coverage as well, to make sure your loved ones are covered.
Am I covered if I become disabled?
Yes, only if you have certain optional benefits in place. Most life insurance policies allow you to choose what is called a rider for an additional cost. These riders are put in place to help maintain coverage should you become disabled. These include:
- Disability Rider
- Accelerated Death Benefit Rider
- Critical Illness Rider
Do premiums ever increase?
Yet again, this depends on the type of policy that you have. With a permanent life insurance plan, as long as you don’t let your policy lapse, your premiums are guaranteed to remain the same. With term life coverage, your premiums will start at a lower rate and stay fixed for the initial term. However, if you choose to keep your policy past the initial term, your premiums will more than likely increase.
What about a medical exam?
If you are obtaining your life insurance plan through your employer, you will not need to complete a medical exam and there are some no-medical exam life insurance policies. Otherwise, a medical exam is a part of a traditional life insurance underwriting process. The medical exam is a basic physical that helps the insurance company assess your risk and determine your premiums.
How can I attain coverage while trying to save money?
Start now. The sooner you buy a policy, the better. Age and health can play a big factor in determining premiums so it will usually cost you less if you are young and healthy. However, it’s never too late no matter what your age. Other ways to save is to find an insurer that will allow you to bundle your life insurance policy with a home or auto policy as these often help you save. Going paperless with your bills and paying premiums on an annual basis can help you save on other related fees.
Do I really need life insurance?
As a whole, obtaining life insurance makes sense. It’s that your loved ones are protected should anything happen to you. There are many ways in which you can choose a life insurance policy that works within your means. However, there are certain circumstances where you may not need to have life insurance any more. Some examples include:
- You and your spouse have accumulated enough assets and income to not only care for yourselves, but sustain your way of living should one of you pass away.
- You no longer have children who rely on you for financial support i.e. they are now independent adults.
- Your estate is too small to pass on any burden of owed estate taxes or if you have enough to cover those estate taxes.
There are tons of questions that come along with buying a life insurance policy but it doesn’t have to be complicated. The first step is to determine if life insurance is even right for you. If so, discuss these questions with your insurance agent to determine which type of coverage fits your needs.