Like any type of insurance policy – auto, home, or health, for example – life insurance is intended to offer you peace of mind. In this case, you gain the security of knowing that your loved ones will be cared for in the event of your death. Whether you suffer an untimely demise or you live to a ripe old age, so long as you hold your insurance policy, your beneficiary (a spouse, child, or other) will receive money that can help to pay for your burial/funerary costs, pay off any outstanding debts that may fall to them, and perhaps have some money left over to compensate for any income you may have brought into the household. If you plan accordingly, the life insurance you leave behind could pay off a mortgage or send your kids to college. Or it could allow your spouse or a child to live comfortably for several years in your absence. But before you select a policy, you might have some questions. Here are a few of the most common.
- What types of life insurance are there? There are several types of life insurance to choose from, but the two main categories are universal and term life insurance. Universal policies are “whole life”, which is to say, they last for your entire life, until you die, so long as you continue to pay for them. Term life policies, on the other hand, have the condition of a pre-selected term, say 10 or 20 years, just for example, after which they expire and you will have to think about renewal or picking a new policy. Term life policies tend to be less expensive than universal, especially if you’re young and in good health, which makes them a great transitional option for people just starting their lives and careers, before they have a lot of extra income to devote to insurance.
- How much does it cost? The cost of life insurance depends on several factors, including your age, your state of health, the type of policy you choose, the amount of coverage you select, and more. You’ll have to do some research to find the policy that meets your needs and your budget.
- Can I borrow against my policy? This depends on the policy you have. Some policies allow for borrowing with penalties, while others are designed to help you save money for retirement. Index universal life insurance is an example of the latter. A portion of your monthly payment goes towards your life insurance coverage while the rest is placed in a tax-free account that will earn interest and start paying out at a predetermined age, say the age of retirement (although it could be higher).
- How do I select an insurance provider? Like any other type of product or service you pay for, the onus is on you to comparison shop. There are many options for life insurance, so you need to seek out a provider that is reputable, reliable, and has a long history of treating clients well.
- When should I get life insurance? If you can afford it, you should get life insurance now! Just make sure you don’t get in over your head. Remember, you cannot allow payments to lapse or you will forfeit your coverage (and your rate). An online service like InsureChance can provide you with a number of quotes so that you can find a policy that’s right for you right now. And if you plan accordingly, you can upgrade down the road when you’re in a more secure financial position.