Life insurance is one of those things that most people only think about when they need it or when someone close to them needs it.
So many people don’t know how to choose the right life insurance plan and end up making an expensive mistake.
This can cost them tens of thousands of dollars and make their families vulnerable if something were to happen to them before they got around to getting the proper coverage in place.
Here are 8 Things You Need to Know About Life Insurance
1) Everyone Needs It
Unless you have a trust fund that will take care of your family in the event of your death, life insurance is something you need.
It’s not cheap, but it can provide for your family.
There are a few things you need to know before buying it though:-
What Kind of Insurance Do I Want?
How Much Does It Cost?
Is My Health in Good Shape?
How Long Do I Have Until I Need The Policy?
2) It’s Not Just for Breadwinners
Did you know that life insurance can also be a great way to provide financial support for your spouse and children if you die?
If you’re the breadwinner in your family, it’s important that your spouse and kids are taken care of financially.
That’s why it’s important for them to know about life insurance.
It doesn’t matter what kind of life insurance plan you get, but it should have the right amount of coverage based on the needs of your family.
3) There Are Different Types of Policies
Life insurance can be confusing. There are so many types of policies and they often differ in cost and coverage.
That’s why it’s important to educate yourself on the different types of life insurance before you make a decision.
A whole life policy, for example, is more expensive than a term policy but will give your family guaranteed coverage for as long as you live.
If you pass away, the insurance company will pay out a lump sum that’s equal to or greater than what was paid in premiums.
It’s also an investment vehicle with tax advantages and may offer some cash value after paying premiums for 10 years or more.
Term insurance offers similar death benefits but only lasts for up to 10 years;
Once that time period ends, your coverage ends too—so this type of policy is best used by those who want temporary protection against premature death.
4) Term Life Insurance Is the Most Popular
Term life insurance is the most popular type of life insurance.
As the name suggests, term life insurance provides coverage for a set period of time, usually ten or twenty years.
If you pass away during this time frame, your beneficiaries will receive the policy’s payout.
It’s important to note that if you die before your term expires and there are still premiums left over on your policy, those won’t be refunded.
The premium covers the cost of paying out your death benefit.
If you’re interested in purchasing term life insurance, it’s best to speak with an agent because they can help determine what amount and type of coverage makes sense for you based on age, lifestyle, budget and other factors.
A single premium cash value policy lets you save money by paying one lump sum upfront instead of smaller monthly payments like traditional policies offer.
5) Whole Life Insurance Is More Expensive
Whole life insurance is more expensive than term life insurance because of the cash value that accumulates with interest over time and the fact that it does not have a fixed term like term life insurance.
The amount of coverage you need for whole life insurance is calculated differently from what you need for term life insurance.
So it’s important to talk to an agent about your specific needs before deciding on which type of coverage is best for you.
6) Universal Life Insurance Is Flexible
Universal life insurance is a flexible life, permanent life insurance product.
Unlike term life insurance, which covers you for a set period of time, universal life insurance covers you for your entire lifetime.
Universal life insurance can be tailored to provide an income benefit at the time of death or in retirement, pay benefits to your dependents if you become disabled and/or have coverage that will continue even if you become unemployed.
With these features, universal life insurance can offer protection to meet many goals and objectives.
If you are wondering what type of life insurance would best fit your needs then consider this article.
7) Indexed Universal Life Offers Growth potential
Indexed Universal Life offers the growth potential of stocks with the tax advantages of life insurance.
Unlike whole life, it’s not a contract between you and an insurance company, which means that you don’t have to worry about tying up your money for a set number of years.
Instead, you can use the premiums that you pay into your policy as collateral for loans or investments.
If your premium payments get too high, you can also make withdrawals from the account in order to lower them.
Withdrawals are taxed at ordinary income rates and incur penalties if withdrawn before age 59 1/2.
That said, there is no limit on how much can be invested in an indexed universal life policy account each year—which is great news for those who want their money working hard.
8) Riders Can Be Added to Policies
This is a rider that can be added on to your life insurance policy.
It will pay out in the event of death, dismemberment, or total and permanent disability. If you don’t have children, this type of policy could be a good idea for you.
There are many different types of riders which may be relevant to you and your family’s needs.
Final Thoughts:
What’s most important is knowing what kind of coverage you need so you can pick the right one for yourself!