What Kind of Life Insurance is Right for Me?

Purchasing a life insurance is a very important decision but if you are not familiar with the insurance world, it might seem like you are dealing with a completely new language. Couple it with the assortment of options available for you and it is the recipe for chaos. If you are drowning in the world of insurance trying to make some sense out of it, this post is what the doctor prescribed for you. Check below to understand what kind of insurance policy is best for you and your family.

Term vs. Permanent Life Insurance

Life insurance can be broadly classified into two categories, that is, term insurance and permanent insurance.

Term life insurance is the most common and probably the most popular type of life insurance plans. It offers pre-set death benefit and offers coverage up till the pre-determined number of years ranging from five years up to thirty years. A premium is set according to the health and life expectancy of the policy holder at the time of application and the policy holder is expected to pay the annual premiums.

Permanent life insurance blends the death benefit with that of savings and the policy covers you for as long as you live. Similar to the term life insurance, the premiums are based on your medical history and health at the time of policy purchase. However, unlike the term life insurance, the premiums can either be fixed or not. Even though permanent life insurance offers savings benefit with a death benefit, it may not be the best choice for most people as it is comparatively expensive from term life insurance for the same amount of coverage.

Although the policy accumulates cash value through savings component, that the term policy doesn’t offer, the premiums are often hefty. One of the major benefit that permanent life insurance offers is that you can borrow against the cash account. However, it can be counteracted in the way that the extra money that you pay as premiums could be used as a savings and serve as your own nest egg. Also, borrowing from the cash value of the permanent life insurance could diminish the whole value and even defeat the purpose of having life insurance. No wonder, term life insurance is a more popular and probably a more viable choice for most people. If you have decided to go with term life insurance, check below to understand why you need to purchase term life insurance and the amount of coverage that you need.

Single with zero Dependents
If you are single with no one depending on you financially, you usually don’t require life insurance. Although your death will affect your family emotionally, it won’t put them in a financial bind. However, if your parents are not very strong financially and you want to secure them financially, you may consider buying a small inexpensive policy.

Getting married
Although getting married doesn’t come with the requirement of purchasing life insurance, life events associated with marriage like having kids and buying house, mean that you will need it soon. Life insurance tend to get more expensive as you get older or your health could make you uninsurable, that’s why it is best to go ahead life insurance when you are young and healthy.

Buying a house
You wouldn’t want your family to deal with financial liabilities during crisis. Buying a life insurance can help your family to take care of your loans like home loans, auto loans and even personal loans.

Baby on the Way
if you haven’t taken a life insurance policy yet, the right time to do it is as soon as you know that child is on its way. In this case, you need to invest in a substantial life insurance policy that allows your family to maintain the same standard of living. Also, if you are already covered with term life insurance, you might want to increase the coverage amount.

Retirement
Retirement is probably not the right time to take life insurance. In fact, it can be outright expensive to get life insurance at your retirement as the higher the chances of your death the higher the premiums would be with lesser returns.

The Bottom Line
you would need to re-evaluate your life insurance policy each time your life situation changes to ensure that in case of any unfortunate event, your family can afford the same standard of living.