There are dozens of stories about families who lost one of their primary earners and found themselves in a horrible financial situation. Many people are scared to even think about life insurance, but you can insure that your family will not be lost without you if you just follow these tips.
Life insurance policies come in various different forms. The two general different categories are term life insurance and permanent life insurance. Term life insurance protects against a fixed amount of time whereas permanent life insurance is for the rest of your life. Term insurance is also usually cheaper than permanent policies. When choosing a policy, you should determine which one you need depending on your current life situation and how much you are willing to invest in the policy.
Pay your premiums promptly. If the holder fails to pay the monthly premium on their insurance term, or if they decide to stop making payments before the whole life plan gains any value, they will lose the policy. They will also be forced to get a new policy and the new policy could be more expensive. This can especially be true if they have aged or fallen into poor health since their policy payments stopped.
Stay away from “guaranteed issue” policies unless they are your last resort. Guaranteed issue policies are intended for individuals with preexisting health concerns. This kind of life insurance can help you avoid medical exams, but the premiums are very expensive and you can only buy a small amount of coverage.
Before purchasing life insurance you should determine the amount of coverage that you need. The easiest way to do this is to take your average yearly salary and multiply it by eight. There are also a number of simple to use online calculators that will help you figure out how much life insurance you need.
When you are choosing life insurance, make sure you are only paying for what you need. Think about what your life insurance will need to cover. It may need to pay for the funeral, a mortgage, or college for kids. Or if you have a separate account for your children’s college, you would not want to pay for that.
Take the time to update your existing life insurance policy when any relevant changes in your life take place. This includes providing for additional dependents if you get married, have children or start caring for an elderly parent. It also includes reducing your coverage if you get divorced or after your children graduate from college. If you’re at an age where your previous dependents are now self-sufficient and you have enough saved for retirement, you can cancel your life insurance policy altogether.
Make sure you get enough coverage. $500,000 can seem like a windfall of cash for your family in the event of your passing. But when you take into consideration a $300,000 mortgage, car loans, student loans, burial and funeral expenses, credit card debt and the like, all those can add up fast.
Check with your employer before purchasing life insurance from another source. Often various types of life insurance may be available through employee benefit packages. These policies are frequently less expensive because the employer is able to obtain a group rate for employees purchasing life insurance through this channel. These policies frequently can be expanded to include family members as well.
When considering your life insurance needs, determine if multiple policies better suit your life and financial situation. In some cases, having a term policy for unexpected crises can protect a family in the short-term, while adding a whole life policy may provide additional long-term protection, and an option for increasing cash value in the policy.
Always purchase life insurance from an established company with a stellar reputation. All the different companies which sell insurance aren’t created equally and never will be. Take the time to research different companies and find the ones that are well established, financially sound, and have a solid reputation for the quality of their investments.
If you are able to find the right life insurance, it can give you an incredible peace of mind for your loved ones. By adhering to these tips, you can stop worrying about the possible future and start focusing on the time you do have with your loved ones.