The Basics of Life Insurance – Life Insurance Awareness Month
Life insurance isn’t top of mind for most Americans, and it may seem like an unnecessary expense at the moment. There are many reasons to buy life insurance, but they all come down to one thing: protecting your loved ones. We all set different goals for ourselves in life. One goal that remains consistent with all of us is the goal to leave our families taken care of and protected. If you have people who depend on you for financial support, life insurance is really about protecting them in case something happens to you.
The global pandemic raised awareness of how fragile life is and the importance of preparing for the unexpected. According to LIMRA research, 31% of Americans say they are more likely to buy life insurance as a result of COVID-19. During the month of September, we celebrate Life Insurance Awareness Month to help remind everyone of the importance of having the right life insurance policy for you and your loved ones.
We understand life insurance can be confusing, so here’s a rundown of the basics.
Types of Life Insurance
- Term: This is the simplest form of insurance to understand, and the type most financial experts recommend because it allows you to purchase the most coverage for the least amount of money. Term policies are purchased for a specified period of time, so be sure to choose one that provides you with the coverage you need.
- Whole Life: You purchase this policy to cover your entire life, as long as you keep paying premiums. Premiums remain constant throughout the policy, and the company invests a portion of your premium that becomes the cash value. These are more expensive than term policies in the early years, but they even out because the premium does not increase.
- Universal Life: This policy is similar to whole life in that it can cover you for your entire life or can be designed to provide the protection you need. It is more flexible in terms of changing premiums and face value throughout the policy. Disadvantages include higher fees and the possibility of increasing premiums.
- Variable Life: Similar to universal life, but offers a selection of investment options in the market through stock, bond or mutual funds. The face value will rise and fall based on the performance of the investments selected.
- Disability Income Life: If you become disabled for 3 months or more, it could prove devastating to your family’s finances. This insurance is meant to allow you to maintain a stream of income to help you stay on top of your finances if you will be out of work for an extended period of time.
How much should you buy?
As a general guideline, you should consider 8 to 10 times your income, but it’s best to consult with a licensed life insurance agent who can calculate your individual requirements.
Here are a few things to consider when buying:
- Are you the sole income provider in your household?
- Are there other expenses, such as college tuition, that may arise in the future?
- Do you have money set aside for potential medical and funeral costs?
- Do you have bills, debts or expenses that would be passed on to your family?
Depending on your answers to the above, you may want to consider buying supplemental coverage.
Why Purchase Now?
Buying life insurance may seem unmanageable right now, but it could be a smart decision. Unlike many other benefits, life insurance is actually more affordable right now than in the recent past. Plus, during this challenging economic period, ensuring that your family will be financially secure in the future is more important than ever. The process can range from a few minutes to a few days to a few months, depending on your health and available products, so start the conversation now with your insurance advisor to guarantee your loved ones are protected. Click here to contact us today.