In the absolute worst-case scenario, life insurance could be a major help for your financial well-being. So even if it is hard to think about, seriously consider buying some now before it’s too late.
More than 100 million Americans have no, or insufficient, health coverage.”It’s difficult to confront your own mortality,” says Mary Lyons, a financial advisor and founder of Benchmark Income Group in Dallas. But she adds, “it’s one of those grownup expenses” that can be dangerous to overlook
When you’re getting ready to purchase life insurance, the first step is to decide if term or permanent coverage is best for your situation. You should check with your workplace to see if their life insurance policy can suffice. Otherwise, an online or traditional life insurance broker would be able to help you out. You’ll need to know your age and other relevant factors before determining the different types of life insurance or life insurance plans you can purchase.
Term vs. permanent life insurance
Life insurance can be divided into two types: term and permanent. Term basically means that the coverage will stop at a defined point, while permanent will keep going as long as you want. Not much more to say about that for now, but there are other differentiations I’m about to explain
Renting your home can be a lot like buying term life insurance. You make payments for a set amount of time, then you might have the option to renew if it makes sense for you financially. Permanent life insurance is like owning a home. You can pay off the asset over time by paying premiums and your family gets a benefit if you don’t, just like when you die with a house mortgage still in place.
Term insurance may be cheaper than other types of insurance, but it provides you with peace of mind that your finances are protected. For those looking for a safety net to protect them and their family, long-term insurance provides that peace of mind. With permanent coverage, you create a much better financial cushion for yourself and your loved ones but at a higher cost.
“I have noticed that regardless of their income or net worth, my clients seem to have a tough time balancing money management. Typically speaking, term life insurance can’t provide the 100% death benefit needed. To provide more death benefits it would cost a lot more cash. It’s worth looking at how term-life insurance can provide coverage gaps in a more affordable way.
Permanent life insurance
There are different types of life insurance, and they fall into 4 main variations: whole life, variable, universal and variable. Universal and variable universal insurance policies combine the features of life and supplementary health insurances and can be used for long-term care or children’s education plans. Each monthly payment will typically cover the cost of the policy and any running costs, as well as going into an investment account that grows and generates returns for you with no additional tax bill.
“There’s a cash value and it’s almost like a piggy bank,” explains Sabine Franco, attorney & owner of Ambitious Legacy Firm, an Hempstead-based law firm that focuses on business & estate planning. The different types of permanent life insurance refer to their flexibility. A universal policy, for example, lets you adjust your payment and death benefit while also giving you a guarantee.
Lyons said that permanent life insurance can act as a “shock absorber,” to protect against dips in the market. They also allow retirees to pull money from their cash value without impacting their family’s final payout.
A reason for permanent life insurance being expensive is that it lasts for a long time. You would pay $481 per month for 35-year-old female in perfect health with a death benefit of $500,000. A male would pay an extra $90 each month on average. Insurance companies take a lot of different factors into account, including gender. Women are typically cheaper than men because they have more longevity lives.
Term life insurance
This is the coverage you go for if you want everything to be taken care of quickly and easily. The most popular variation is one where you pay the same monthly price for the duration of coverage – usually 10, 20 or 30 years. Life insurance covers you when you pass away, and the death benefit gets paid out to your beneficiaries. With other financial products though, like retirement and investment accounts, sometimes people have a hard time wrapping their head around it if they’ve never had any experience with personal finance before.
With so many term policies having an option to convert, Franco says, you can increase the amount of time your policy lasts if it will expire. The conversion might cost a little more.
“If your budget is tight, you would want to get term insurance in place,” Lyons explains. “It’s important that you have some coverage and can adjust it as milestones happen in a person’s life such as buying a house and getting married or having a baby. Lets say that you are still not confident in your ability to beat the market. In this case, you might have to switch from a portfolio of mutual funds to a low-fee index fund.
A woman of 35 can pay about $25 to have a $500,000 life insurance policy from Policygenius; for a male, the cost is about $30.
So now this way you can choose best term life insurance, best life insurance companies, best whole life insurance.
