Term Life Insurance
There are two types of life insurance: Term Insurance and Cash Value Life Insurance. Term Life Insurance began to gain favor in the 1980s when financial planners started promoting life insurance protection and separated investments. Since then, millions of Americans have followed this strategy.
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Why Most Americans Prefer Term Life Insurance
This type of insurance has lower premiums in the beginning years. One can choose from a 10 - 40 year level term premium contingent upon your age. Term insurance coverage does not build up cash value; however, you can place extra dollars into investments with lower premiums. A major advantage of term insurance is that it offers the opportunity to buy more extensive insurance protection for your premium dollar.
Why You Need a Life Insurance Policy
When you are getting married, planning to buy a house, expecting a child, or taking out a loan; you need life insurance If you believe that you will acquire, accept or inherit any responsibilities in the immediate future, you need a life insurance policy. Consider getting one, as it can fulfill your financial obligation to your family in helping cover expenses in the loss of your income.
Too often, couples do not consider the non-working spouse. However, the replacement cost to hire someone to fulfill these daily responsibilities is easily thousands of dollars. You will have to consider the salaries necessary to pay your monthly bills, a cook, housekeeper, and more. If you have children, add babysitter, teacher, and multiply the replacement cost tenfold.
When you have children, and you are both wage-earners, you both have an obligation to provide for your family. Multiply common obligations by the number of children and then by the number of years between now and when each child turns 18 to 21. In order to ensure there is enough money for food, clothes, shelter, and education; there is no doubt that both parents need life insurance.
Single individuals may not need life insurance unless monetary obligations exceed their accumulated cash assets. If you have outstanding college loans, car payments or a mortgage, you need life insurance.
Too often, couples do not consider the non-working spouse. However, the replacement cost to hire someone to fulfill these daily responsibilities is easily thousands of dollars. You will have to consider the salaries necessary to pay your monthly bills, a cook, housekeeper, and more. If you have children, add babysitter, teacher, and multiply the replacement cost tenfold.
When you have children, and you are both wage-earners, you both have an obligation to provide for your family. Multiply common obligations by the number of children and then by the number of years between now and when each child turns 18 to 21. In order to ensure there is enough money for food, clothes, shelter, and education; there is no doubt that both parents need life insurance.
Single individuals may not need life insurance unless monetary obligations exceed their accumulated cash assets. If you have outstanding college loans, car payments or a mortgage, you need life insurance.
Factors to Consider When Buying Life Insurance
In assessing your needs, you should consider the following:
- The need to protect children until they are independent
- The need to pay off debts such as mortgages, educational loans, or other loans
- The need to protect assets that have accumulated over the years
- Determine the amount; 10 multiplied by the annual income is a general rule of thumb, plus any debt service.
- Determine the length of time you are going to need the coverage. Generally, you may secure a level term premium for up to 40 years, depending on your age.
It is sometimes difficult to arrive at “length of time” based on variables so consider some known facts
- Life insurance rates tend to increase as one gets older. Choices are narrowed as upper age ranges are reached, and some companies stop issuing new products at specific ages, i.e., 65, 70, or 75.
- Life expectancy is currently over 70 and increasing every year.
- Life insurance rates increase significantly if your health deteriorates, and there can come a time when you will not be able to buy new insurance at any price.
Buying life insurance is a qualifying process. Factors considered when underwriting a policy include your health, lifestyle (participation in hazardous activities), and financial situation. Rates may vary depending upon these factors present in your life.
Caution: Do not cancel any insurance protection until you know you have qualified for a new policy.
Caution: Do not cancel any insurance protection until you know you have qualified for a new policy.
