What is Life Insurance? Life insurance ensures financial stability for loved ones after your death by paying out a death benefit. It helps to replace your income to prevent loved ones from having financial concerns or falling into debt, giving them a sense of inner peace while ensuring their financial future.

While deciding on which life insurance plan to choose can be confusing, it is an important decision. Some questions to consider when thinking about life insurance are:

  • When is the right time to purchase life insurance?
  • What are the different types of life insurance?
  • Why should I buy life insurance?

When is the Right Time to Purchase Life Insurance?

The right time to purchase life insurance is different for everyone, depending on individual circumstances. However, life events can occur that make having life insurance more important. Some major life events include:

  • Changes in marital status.
  • Having a baby.
  • Changes in health.
  • Debt (mortgages, credit card debt, car payments, student loans, etc.).

Having dependents such as a spouse or child who are financially dependent on your income is an appropriate time to consider life insurance. If your death could impose financial hardship on others, it could be a good time to consider purchasing a life insurance policy.

When considering life insurance, age is often a factor since premiums are typically lower for younger and healthier people. As individuals age, health problems often develop that can result in higher premiums. Furthermore, pre-existing medical conditions can result in higher premiums and even disqualify you from some insurance plans. So, as a general rule, it is better to purchase life insurance at a younger age and when you have fewer pre-existing conditions.

What Types of Life Insurance are Available?

There are two main types of life insurance: term life and permanent life.

  • Term Life Insurance covers the policyholder for a specified period, anywhere between one and thirty years. Term life insurance pays only if death occurs during the term of the policy. Term life policies tend to have lower premiums, but there is no cash value for the policyholder to withdraw or borrow against.
  • Permanent Life Insurance covers the policyholder for life, as long as the premiums are paid. Permanent life insurance pays a death benefit. These policies tend to have higher premiums, but there is some accumulated cash that the policyholder may withdraw or borrow against. Different types of permanent life insurance include:
    • Whole Life provides coverage for the entire life of the policyholder with savings that grow at a solid rate.
    • Universal Life includes a savings element as well as a death benefit while offering different types of premium structures. The cash value also earns a money market rate of interest.
    • Variable Life combines a death benefit with a savings account that you can invest in stocks, bonds, and money market mutual funds.
    • Survivorship Life Insurance covers two individuals, and the death benefit is payable upon the death of the second insured policyholder. This type of life insurance is often used to pay estate taxes for high net-worth couples or for leaving a charitable contribution.

Why Should I Buy Life Insurance?

Life insurance gives loved ones a sense of financial security in the event of your death.  Here are a few financial obligations to consider when purchasing life insurance:

  • Paying off a mortgage.
  • Home expenses.
  • Higher education for children.
  • Childcare.
  • Funeral expenses.
  • Hidden expenses (401k, retirement contributions, etc.).

While you want to consider current expenses such as your mortgage and current bills, the primary goal for a life insurance policy is for your loved ones to have a solid financial foundation for the future. Consider expenses such as the mortgage payoff amount and college tuition for children, so that loved ones are not left with a financial burden.

Life insurance is also an excellent vehicle for providing an inheritance for loved ones and making a charitable contribution at your death.

ABC Dennis Insurance

ABC Dennis Insurance is an independent insurance agency established in 1997 that provides life insurance to individuals and businesses.

As an independent agency, we find the best coverage with the most competitive rates among multiple insurance companies. This is important because no insurance company can meet every insurance need. So, we shop multiple insurance carriers to find the coverage that best fits our customers’ every need. Let us help you find the coverage you need!

Resources

https://www.iii.org/article/what-are-principal-types-life-insurance
https://www.investopedia.com/articles/investing/072816/what-best-age-get-life-insurance.asp
https://www.iii.org/article/why-should-i-buy-life-insurance