If you’ve never thought about getting life insurance, then this is a good time to start. That's because there are many factors that can affect your ability to get a policy later on in life. The premium you pay depends on a variety of factors, including how much income and savings you have and the page you’re at in your love story. For example, if you or your partner has dependents from previous relationships, you will pay a higher premium.
What is Life Insurance?
The word insurance is often thrown around in conversations, but few people understand what it really means. In the simplest terms, it's an arrangement between two parties that provides for payment of a benefit, called the "indemnity." This happens after the policyholder pays a specified amount of money, called the "premium," annually or monthly. The claim can be in a lump sum or installments, and it remains due even if the policyholder and beneficiary die before completion.
Why Do I Need It?
Life insurance will provide for your family in case something unexpected happens to you. It helps your loved ones pay current bills and expenses and reduce financial stress to focus on what's important - living their lives without worrying about money.
How Much Life Insurance Do I Need?
This depends on your situation. Most experts recommend a policy of at least 10 times your annual salary. However, other factors come into play as well, such as the number of dependents, your gender, and whether or not you smoke tobacco. So, these numbers can vary widely based on the insured person's situation.
However, if you fund your children’s education with scholarships or college savings plans, your beneficiary will have fewer responsibilities should the policyholder die. And that will reduce the amount you pay in premiums upfront.
If you have two kids in college and a mortgage that costs a lot more than your family could cover on their own, then you might want to consider something more substantial.
What are the Common Types of Life Insurance Coverage?
There are three common types of life insurance coverage: term, whole, and universal. Term insurance is the most popular form, and it works by paying beneficiaries a predetermined sum for a specific length of time.
A universal insurance policy covers all aspects of the policyholder's life, including property protection and many types of personal liability. It may also cover some forms of the homeowner’s policy, medical expenses, and health care diagnostic expenses.
A whole life insurance policy insures people for their entire lives. It’s a type of permanent life insurance that can be paid with premiums taken from your paycheck, bank account, or retirement accounts.
Tips for Buying Life Insurance Online or In-person at an Agent's Office
One of the best ways to buy life insurance is by going through an agent's office. The benefit of this method is that you can work with the same person every time and get advice on more than just your life insurance.
It’s also possible to buy life insurance online, but before you do, it's important to talk to an insurance agent first so they can help you find the right policy for your needs.
Remember, life insurance can be a great addition to your financial plan, but it’s not the be-all, end-all. In fact, if you have enough savings or a very simple financial life (no debt, no dependents), then it might not make sense to buy coverage.
For most families, though, life insurance is a smart and essential part of any financial plan. When you know how much protection you need and where to buy it, finding the right policy is just a matter of time.
Which Life Insurance Policy is Best For You?
It is worth noting that everyone's insurance needs change with time, which is why you need to understand all your options when purchasing life insurance.
Generally, term life insurance is less expensive and provides coverage for a specific period. It covers the bills or mortgage payments and any outstanding debt (such as student loans) if you die before its maturity.
Then there's universal life insurance, which can be more costly but may provide supplemental perks such as investment management and college planning. If you have dependents who will need money in the future, this might be a better choice.
However, if you're looking for something quicker and cheaper, then term life insurance is probably the best option for now.