Having a life insurance policy is essential if you have a spouse, partner, and/or children that depend on you financially. According to several academic studies, it is predicted that you will need five to 15 times your annual salary in order to continue to provide your family with the lifestyle they have become accustomed to after you’re gone. Life insurance is closely intertwined with health insurance. In many cases, both are offered and bought simultaneously. Some of the same companies offer life insurance policies to individuals in addition to health insurance. Neither decision should be made rashly, but the process of looking for health insurance often causes a person to examine their life circumstances. That is a good mindset in which to begin thinking about life insurance.
Life and health insurance are each meant to protect against financial ruin under unexpected circumstances. In the case of a life insurance policy, that circumstance is the death of the policyholder. The payout of the insurance for your life can be used for funeral expenses or to settle debts. A high quality life insurance plan will reduce the your loved ones’ burden.
The average life insurance company offers several varieties of life insurance, of which term life insurance is the most affordable. In most cases, a term life insurance quote is usually cheaper compared to other forms with the same cash value. That is because the cash value of a term life insurance policy is only paid out if you die within the life insurance term. Term life policies are typically sold in five-year increments, for periods between five and 30 years. Term life insurance does not earn any interest. Borrowing from your life insurance policy is possible, but not recommended: the amount must be paid back with interest, or it will be deducted from any payout in the future.
In contrast, whole life insurance remains in effect for as long as you continue paying the premiums. With a whole life policy, guaranteed cash values accumulate from a portion of your premiums and are paid out to you periodically. That can help in long-term financial planning for your child’s college education or your retirement. The entire guaranteed cash value will also be paid out if you surrender the policy for whatever reason. The actual amount and number of guaranteed cash values provided varies between whole life insurance products. This type of life insurance also has the possibility of paying out dividend, if your life insurance company spends less than they accounted for when calculating their whole life premiums. Whole life insurance plans generally offer steady premiums. A whole life insurance quote is generally more expensive than a term life quote. However, this type of life insurance may appeal to people who are younger and unable to pass away during typical life insurance term periods.
Variable life insurance is a permanent type of life insurance which offers individuals more control over their money. The trade-off is that variable life insurance rates are the most costly. With a variable life insurance policy, the policyholder has total say over how the cash value of their policy is invested. You can invest in anything anything from relatively safe bonds to potentially risky stocks, as well as money market funds. The suitability of a variable life insurance policy rests on your financial and investment expertise. Experts recommend that you you invest slightly more conservatively than you would in your other personal investments, since variable life insurance is intended as a safety net for your family. If you are experienced and confident in your investing ability, variable life insurance may be ideal.
When looking into buying life insurance, it is essential to consider several factors. To start out, you must calculate the cash value you desire from the life insurance policy. You can multiply your annual base salary by a number (many people use 5 or 7 as a multiplier) in order to figure out how much coverage you need. It is also recommended to account for outstanding debts, such as credit card balances or mortgages, as well. The value of your life insurance should ideally serve in place of your income for several years, although you should also be able to afford the life insurance premiums in your current budget.
Are you wondering what type and amount of life insurance is best for you and the ones you love? VitalOne’s licensed insurance agents are available to help you compare quotes and coverage from major life insurance providers.