Many people wait to purchase a life insurance policy until they are older, and the premiums are higher usually because they don’t understand why they need life insurance when to buy it, or what type of policy is best. Understanding what types of life insurance will probably make the most sense for you at different points in your life is critical.
First, understanding term life insurance versus permanent life insurance is essential. Term life insurance allows you to receive a predetermined death benefit and covers you for a specified number of years. The premium is fixed, and it’s based upon your health and life expectancy when you apply for the policy—so purchasing early on is important.
Permanent life insurance combines a death benefit with your savings or investment account. This policy covers you for as long as you are living, and the premiums have the option to be fixed or not. However, permanent life insurance is usually more expensive, and you pay more for the same amount of coverage as term life insurance. Basically, you are paying a higher price because your policy is accumulating some cash value through your savings or investment account.
Second, understanding when and why you should buy life insurance as well as how much coverage you need is key. If you are single and no one depends on you financially, then you usually don’t need life insurance. While your death will impact your loved ones, it won’t financially ruin them. However, if you have a lot of debt or your parents are not financially wealthy, then you may consider purchasing a small, inexpensive plan to cover your costs.
If you were just married, it doesn’t mean you need to purchase a life insurance policy right away; however, if you plan on buying a house or having children, then you should purchase sooner than later. This is because life insurance is more expensive as you get older and you decline in health. One of the most critical times to purchase life insurance is when you have a baby on the way. As soon as you have children in the picture, it’s time to consider purchasing seriously. Also, at this stage in life, you will want a substantial policy that will not only pay for at least 18 years of child expenses but also your household expenses and even college tuition. Basically, you want to purchase enough insurance to allow your family to live at the same standard of living they previously were before you passed away.
What’s the bottom line? If you are one of the lucky ones who win billions of dollars in the lottery, then you may be able to cancel your life insurance policy. However, if you aren’t, then you will want to re-evaluate your life insurance needs each time something in your life changes. This is important because you want to make sure that anyone who depends on you financially won’t be negatively impacted when you pass away.
With over fifteen years experience in Finance and Insurance, Sam Goldsmith brings a wealth of keen judgment, knowledge and understanding to his profession. As the Principal broker of Goldsmith Insurance Agency, based out of Denver, Colorado, he is responsible for the sales and management of the organization specializing in Life Insurance, Disability Insurance, Annuities, and Pension Planning. Licensed in over 45 states has helped Sam grow his business exponentially. Since starting our website in 2007 Sam has helped placed over 800 policies into force, well over six hundred thousand dollars in annual premium.