Do I Really Need Life Insurance?
Short answer: Yes, you really need life insurance. But there are a few circumstances under which it's absolutely critical that you have life insurance:
- You have kids: If you have kids, having a life insurance policy on yourself is the best possible way to protect you kids. If your salary is lost, how will your family afford clothes, food, a house to live in and a good education? Life insurance can make up for the shortfall of an active income.
- You have someone who depends on your salary: Maybe it's a spouse or an elderly parent. What would happen if your salary disappeared? Would they be able to maintain their lifestyle, or would they be left scrambling to survive?
- You have a large mortgage or car payment: Losing a family member is traumatic enough without immediately having to worry about losing your car or finding another place to live. Even if your significant other has a job, losing that second income may make it impossible for them to stay in the same house or keep their car. Help your family keep living the life to which they've become accustomed.
- You want to plan for retirement: Life insurance can benefit you even during your lifetime. Whole and universal life insurance plans can help you save money or even earn money through interest, and can be an integral part of your retirement plan.
Still not sure if you need life insurance, or want to find out which policy is right for you? We'll walk you through everything you need to know, and help you find a product that's perfect for you and your family.
Term Life Insurance
Term insurance provides coverage for a term of one or more years. The 20-year plan is the most popular version. Term insurance pays a death benefit if death occurs during the policy term. However, it does not include a cash value that can be used in the future.
Some term insurance policies are renewable for one or more terms, even if your health changes, though the premium usually increases with each renewal. Inquire about renewal premiums before you buy. Also ask if there is an age when you can no longer renew the policy.
Most term policies also include an option to convert to a cash value policy without having to provide evidence of insurability. Make sure you understand how the convertibility option works. The annual premium for term life insurance is usually less during the early years than the premium for a cash value insurance product. Be sure to compare the long term cost of each product before you buy.
Cash Value Life Insurance
Cash value life insurance is designed to last an entire lifetime. Most products provide coverage until age 100 or later. The premium for this type of insurance is higher than term insurance during the early years of the contract when compared to term life insurance. The premium that is not used to cover expense or the cost of insurance is invested by the insurance company. That investment builds a cash value that increases with time. That cash value can be borrowed to:
- Fund a business or investment opportunity.
- Pay education expenses, such as college.
- Enhance your retirement income.
- Pay emergency medical expenses.
There are several types of cash value life insurance, including whole life, universal life and variable life.
- Whole life insurance provides coverage for as long as you live. The annual premium is usually payable for a period of time such as 20 years or to age 65. Some are payable forever. The premium amount never changes unless there is a change in benefits. The cash value is guaranteed as shown in the policy.
- Universal life insurance is a flexible premium adjustable life insurance product that allows you to vary the premium payment within certain limits as defined by the insurer and the tax code. The death benefit can be increased or decreased as defined in the policy without having to buy a new contract. The cash value earns interest at a rate determined by the insurer and that rate is subject to fluctuation based on market conditions. Like whole life, the cash value can be borrowed. Additionally, the cash value can simply be withdrawn, thereby avoiding interest expense charges, subject to policy limits.