Life insurance can’t replace a loved one, but it can help keep an already stressful situation from becoming worse. Keep in mind it’s important to consider coverage for both income-earners and caregivers in your household. Life insurance would ideally replace the working parent’s income, should they no longer be around. Or it would support resources for outside childcare, so the working parent could continue to provide an income.
Empty nesters and retirees may no longer have financially dependent children, but make sure to consider the expenses of a surviving spouse. A reduction in income and pensions could make it difficult to cover mortgages, final expenses, or other debts. Still undecided? There are many situations in which life insurance can give parents peace of mind.
Life insurance is not one-size-fits-all. Everyone’s needs, wants, budgets, and goals are different. However, you can get a good estimate of how much of a death benefit your family will need to maintain their life style. Consider things like your mortgage, monthly bills, taxes, education expenses, and debts. Ideally, the coverage amount should be large enough to meets the needs of all those who depend on you.
The cost of purchasing life insurance can vary. Unfortunately, in the end it comes down to this: the greater your risk of dying, the more you are likely to pay. This is why purchasing life insurance when you are young and healthy is SO important. Carriers looks at factors like age, medical history, nicotine and alcohol use, and dangerous hobbies. Some conditions can cause the denial of an application, so most policies require a medical exam. However, your health isn’t the only thing factoring into your cost. The type of policy, the coverage amount, the length of the policy term, and any additional policy rides also factor into your premium amount.
Types of Policies
There are two different types of life insurance: term and permanent. Term life insurance has guaranteed level premiums for a fixed policy term, usually 10, 20, or 30 years. The premium will likely go up if you maintain the policy after the initial term is up. This type of policy is a great option for those on a budget as it generally is more affordable than permanent policies. It’s also go for those with immediate financial concerns, like a mortgage or a child heading off to college.
Permanent life insurance provides coverage for the rest of your life, as long as premiums are paid. Permanent life is made up of two main policy types: whole and universal. Whole life insurance policies has permanently level premiums and can also generated cash value that can be borrowed against. Universal life insurance is a much more flexible option. You can adjust size of the premium amount, benefit amount, and accumulation portion, within the policy limits. You can even build up cash value to pay your future premiums!
Juvenile Life Insurance
Unlike 529 college savings plans, a child’s life insurance policy can be used for purposes other than education expenses. Your child could use the cash value of their insurance policy for things such as starting a business, helping them purchase a home, or covering wedding expenses! It’s best to purchase life insurance as soon as possible, as the earlier you begin the policy the longer it has to build cash value. However, this isn’t the only advantage of a children’s life insurance policy!
Additionally, getting a permanent life insurance policy now means they won’t have to worry about qualifying as an adult later. Juvenile life insurance policies guarantees the future insurability of your child, regardless of their future health or lifestyle. It doesn’t even require a medical exam! Purchasing a life policy for your child now can also help them get the best possible premium rate, as costs tend to be much higher as an insured ages. A well thought-out life insurance portfolio can be a great asset for your children or grandchildren!