Everything You Need To Know About Life Insurance
Not everyone is in immediate need of life insurance. While it is never going to hurt you to have life insurance. There is no reason to invest in another bill you cannot afford if you are not in an immediate need for it. For example, if you are young, healthy, and have no dependents – you are not an ideal candidate for life insurance. If you, however, have a family or plan on having one, it would be a good idea to learn more about life insurance.
How Do You Determine How Much Insurance You Need?
There are two ways you determine how much insurance you need. The first is income replacement and the second is needs-based.
Income Replacement: Age and earnings are used to determine income replacement. The final amount will usually be higher than if you used a needs-based approach. Beginning with your age, you will determine the number of years you will need to replace when you die. The downside to this method is it will always be an estimate. There is no concrete way to determine exactly how much money your family will need when you pass away.
Needs-based: Needs-based will consider the situation specific to what caused you to die and how it is currently impacting your dependents. Factors that determine the amount on a needs-based decision include the cost of education, whether or not you have a mortgage, and if your partner will need to start working.
What Type Do You Need?
Whole Life Insurance: Whole life insurance maintains a guaranteed amount and rate of return on cash values and the premium will not increase.
Variable Life Insurance: Variable life offers different degrees of reward and risk. You are setting aside premium dollars to a separate account comprised of several tools and investment funds within the company's portfolio including bonds stocks, and others. If the investments drop, so will your death benefits. Variable universal life insurance maintains a flexible premium allowing a skipped payment if your budget is not up to par that month.
Universal Life Insurance: Universal life offers fixed premiums offering adjustable payments giving you the option to pay a higher premium if you have extra cash and lower payments when the cash flow is not good.
Term Insurance: Term insurance is a good choice because it is affordable. Financial responsibilities are made easier to cover any additional unexpected costs. Coverage is provided for a specific period or a specific amount of years. No cash-value is offered but many policies offer the same premiums for policies such as 10, 20, or 30 years.
Only you can decide whether you need life insurance and which type of policy is best for your needs. For more information, contact a local insurer (such as Advantage Insurance Agency, Inc).