Life Insurance Buying Advice
When the time comes to protect those whom you care about most in the world, knowledge of life insurance policies is essential. Before you invest your money, invest a little time and do your research on the various life insurance policy types and of course the prices.
Insure for your children
The paternal instinct to protect your children is a natural and powerful human trait, but if you were to have an unforeseen accident, who would look after the children? How could they possibly cope financially, with no parental figure to support them?
If you or your spouse passes away, your children need to be protected against hardship and life insurance is the best way to do it.
Irrespective of your marital status, proper insurance will result in your children being able to achieve their dreams, and you will know that even in your absence, you will have helped your kids immensely.
Reasons for doing it
It should be apparent that being insured will help your children, if it is not, here are five reasons.
I: Any expense and debts incurred by you will be settled.
II: They will be able to attend college, unencumbered by debt.
III: Their good health will not be an issue, as they will be able to afford the best medical care.
IV: Having no outstanding monetary problems will offer them peace of mind, and enable them to enjoy a fine quality of life.
V: Freedom for your children to achieve great things in the future, without any financial obstacles blocking them from their dreams.
Now imagine that you are the only earner in your family, and the situation that would arise if something suddenly happened to you. Aside from the anguish suffered by their loss, they would be thrust into financial peril, with no one to take care of them. By being prudent, and taking out a life insurance policy, you guarantee their security.
Insurance is even more pertinent for single parents. Think about it, who is going to look after your kids if you pass away? If you had a mortgage for example, how could they possibly pay? Again, a life insurance policy is the absolute best thing you can do for your family in this situation.
A Step in the right direction
Now that you know how important insurance is how do you go about getting the best possible coverage?
The two main policies are term insurance and whole insurance. Term life insurance allows you to choose the length of coverage that you are comfortable with, but only gives you life insurance, with no cash value incentive. Whatever the value of the policy is when you die is the amount that is received by your beneficiary, so long as you die within the term. As term life is only fixed for a certain number of years, you must be careful to ensure that it does not run out.
Whole life insurance is a fantastic option, as it guarantees payment whenever you pass away, so long as you have kept up to date with premium payments. Cash value also gets accumulated with these policies, meaning that the beneficiary will have a ready sum available until the whole process is completed.
Of course, everyone's current financial situation is different, and you can only purchase whichever policy is affordable to you at that moment in time. A term life policy is cheaper, and is ideal for those who are unable to pay the large whole life fee, but still know the importance of security. Whole life is perfect for those who are earning well at the minute, but are aware of the grave implications to their family, should something happen to them.
Now you need to figure out how much your policy should be worth to adequately protect your family.
First, you should take your annual income and multiply it by eight. That is, if your income is $50,000, the policy should be worth $400,000. Alternatively, multiply your income by six, and also include large, one-off expenses such as college tuition fees, or mortgage payments. Or, tally up your total expenses, and multiply it by the number of children being provided for.
Not just for older people, life insurance is arguably more important for young families, as they are generally have a lesser income. If this is the case for you, plan accordingly, particularly if you have young children or if your spouse has no income because they stay at home to look after your kids.
Final Word
Here are a half dozen tips to help you decide your life insurance plan.
I: Do not depend on life insurance provided by an employer, this amount is normally nowhere near what is required, plus if you lose the job, you have nothing.
II: Avoid group plans. People believe that a group plan would be cheaper, when it is actually less expensive to purchase individual life insurance, especially if you are healthy.
III: Do not neglect to factor in a stay at home parent. If they die, hiring carers for your children could be very costly indeed.
IV: If term life is all you can afford, make sure that it is for a long enough period of time to see your children through to adulthood.
V: Pick a term life policy that can convert to whole life if you think that you can afford that cover one day. This will prove cheaper in the long run.
VI: Immediate post-death costs such as funeral expenses, debts, estate tax, and even inflation should not be ignored as these can be quite hefty.