Tips for Choosing Life Insurance
Inevitably, the people we love and care for, and even ourselves, we will all die. And being able to take care of the expenses of a funeral and any accounts the deceased left behind is one of the major stresses a grieving family doesn’t want to face or deal with in any kind of rational form. This is natural, and it is best to work through your emotions before pursuing anything of great consequence; however, these accounts will need to be faced sooner rather than later. Having a life insurance policy can put a large dent or clear up totally any outstanding debt you or your family members face upon your untimely or fully expected demise.
Here are things you need to consider when choosing the right life insurance policy:
What Kind of Policy Do You Need?
Life insurance policies fall under two umbrellas, permanent and term. Term policies sound like exactly what they are: life insurance policies that exist for a set amount of time. Term policies can be renewed or created as a convertible, where they can be transferred to a permanent policy without a medical exam to pass. A term policy may work for an individual on a fixed or limited budget, but who needs a large death benefit to pay out. Typically, an individual would be expected to die during the term of the coverage, but it can be renewed with a successful medical exam.
Permanent policies last for an entire lifetime and payout upon death; plus, the insurance company typically structures built-in savings account into the policy that collects dividends the company pays you and gives the policyholder monies to borrow from throughout the life of the policy. Permanent policies also take on different faces: Whole, Variable, and Universal or Adjustable. The whole is the most common, featuring the savings account, and setting a customer up for consistent payments toward a selected death benefit. Variable policies combine the perks of Universal and Whole policies providing a savings account that the policyholder can then invest, but comes with risk from the market and its fluctuations. Universal policies allow for a larger death benefit upon passing a health exam, and the cash value, or savings, account earns interest at a money-market rate. Once monies collect in that account, universal policyholders can adjust the premium rates, but if your cash value account runs out of money the policy could lapse and coverage would be halted.
What Will This Money Need to Cover?
Knowing in advance what kinds of accounts will be paid by the monies dispersed from this policy will give you a bright light into what kind of policy to open up to begin with. If this money will pay off funeral expenses and the accounts only belonging to the deceased, then a smaller policy could be purchased and paid into. However if the deceased was the sole breadwinner and an entire family’s accounts will be paid off with their life insurance policy, a whole life policy with a savings account that’s never touched may be the best route. This can provide stability and a larger sum of money for the beneficiary and any other family members affected by the person’s death.
How Much Should the Policy Be?
The amount of a life insurance policy should be reached with the family’s bills and potential funeral expenses kept in mind. Any amount is viable, as long as you can afford the monthly premiums that will pay into that policy. With some companies, you may be able to choose your death benefit payout; and with policies that are provided by your employer, there may be predetermined amounts to choose from that come with comparable monthly premiums. These can be automatically withdrawn from your weekly or monthly paycheck, leaving you free from worry about making those premiums regularly.
A life insurance policy is one of those things a person purchases but doesn’t see an immediate return on the investment—usually, there is no return on investment until the person buying the policy dies. Unless there is a viable savings account option that quickly collects money, but even then, those monies need to be paid back and will be recouped before any monies are dispersed to the beneficiaries upon the policy holder’s death. Even though no return on investment is immediately available, purchasing a life insurance policy, even to cover only your bills and the funeral expenses, is a great way to take a load of pressure off the surviving family members after you shuffle off your mortal coil.