A large number of us purchase life insurance for the simple reason that we want our loved ones to be financially secure after we die, and we don’t want our deaths to be the cause of financial insecurity – whether because of the funeral costs themselves, or the lack of whatever income we provide. When it comes to estate planning, cash accumulation, wealth transfer, and estate tax liquidity, life insurance should be considered a life saver – so to speak – for achieving these goals, and helping out those we love.
The thing is, while life insurance can provide us with exactly what we need for our financial plans, there are a very large number of different choices that must be made with regards to policy type, and the details within those policies, and it can often feel overwhelming when we are faced with those decisions.
One of the most important choices you will need to make, is the life insurance needs that you have, so that you will be able to narrow down the potential policies for you. Therefore, to find out the type of requirements you have, you will want to consider certain issues. These include:
What is your financial situation, and what is the standard of living that you wish to continue for your dependents after you die. You will need to remember that in addition to simply paying for what is required from day to day, there will also be funeral costs and possible final medical bills. Consider whether or not your family will be relocating. Will there be enough funding provided for important considerations such as mortgage payments, daycare, or college?
When will you wish to reevaluate the policy that you choose today? Do you foresee any life-changing events in your future that will need you to reconsider the policy that you will be choosing for now? These events may include marriage, divorce, the birth of a child, adoption of a child, the purchase of a major item or property, such as a home, business, or vehicle.
For different situations, there are different types of insurance that are recommended. Some common examples include:
Single with no dependents – you will want life insurance that will provide enough money for funeral expenses, any debts (such as loans or credit cards), and elderly parents who may have been depending upon your support for retirement or care. Remember, the younger and healthier you are, the cheaper it will be to begin buying life insurance. The longer you wait, the more expensive (and less possible) it will become to qualify for a policy.
Single person with dependents – your insurance should cover your funeral expenses, medical bills, debts, caretaker and education expenses for your dependents.
Couple with no dependents – your life insurance should cover funeral expenses, medical bills, any debt (especially vehicle payments and mortgage payments).
Couple with dependents – find a life insurance policy to cover funeral expenses, medical bills, debts, child rearing expenses, education costs, childcare costs.
Elderly couple – your insurance policy should cover funeral expenses, medical bills, any impact that is made upon disposable income, any debts, and any impact upon assets that were meant to be left for children or grandchildren.
So where does that leave you? You now have the decision of whether you want “term” or “permanent” life insurance. Term life insurance will provide your survivors with death benefit protection for a determined length of time (for example, a 10-year policy). If you are looking for coverage for only a short period of time, this is normally the wise choice. However, if you intend to use your life insurance policy as a type of savings, you’ll benefit from a permanent life insurance policy.
No matter what kind of policy you want, there are certain things required on your part in order to qualify for a life insurance policy. You will need to look into these regulations to be certain that what you want fits your situation.
So how do you really know that a life insurance policy is right for you? If you are still unsure after reading the above information, have a good talk with a quality life insurance agent or broker. Remember that they do want your business, so they will always tell you that you require life insurance, but the true benefit from the conversation will come when they advise you as to the actual type of policy that will be best for you. Talk to 2 or three different qualified representatives and compare the results. This way, you’ll get to know more information, and become familiar with what’s actually available to you.