Understand Life Insurance
Life can be confusing and complicated at times. And buying life insurance can be one of those times-but it doesn’t need to be. Understanding the different types of life insurance can be easier than you think once you take advantage of the resources available to you.
NetQuote can help you learn about the pros and cons of each type of life insurance, from whole life insurance to term life insurance, and the variances within each type. You can then understand how policy rates vary, and what type of insurance is designed for each type of individual and their circumstances.
Do you need life insurance?
Your personal situation will determine your life insurance needs. If you have no dependents, you probably don’t need life insurance. If you have a family but don’t generate a significant percentage of your family’s income, you may not need life insurance.
However, you have to think of the costs that will be associated with taking care of your children if you do pass (ie. additional day care, nannies, etc).
If your salary is important to supporting your family, life insurance plays an important role in ensuring that the financial obligations are covered in the event of your death.
How much life insurance do I need?
There are a lot of factors that play into how much life insurance you’ll need. The amount of life insurance you need depends on factors such as your other sources of income, how many dependents you have, your debts, and your lifestyle. The general guideline is between five and ten times your annual salary.
What type of life insurance should I buy?
The term versus whole life insurance debate continues. Some experts say that if you’re less than 40 years old and don’t have a family disposition for a life threatening illness, go for term insurance, which offers a death benefit but no cash value.
In this more traditional life insurance policy, the premiums stay the same over the life of the policy, which stays in effect until your death, even after you’ve paid all the premiums. A cash reserve is built up, but you have no control over how it’s invested.
Whole life offers both a death benefit and cash value, but is much more expensive. Some of the money you put into a whole life policy goes towards a savings program, which then earns interest or is put towards other investments. In the end, a whole life policy that’s been in effect for 25 years will provide a much larger benefit than a term policy.
Variable life insurance policies are the most expensive because they build up a cash reserve that you can invest in any of the choices offered by the insurance company. The value of your cash reserve depends on how well those investments are doing.
In a period of economic growth, your investment can grow quickly. Because these policies are dependent on the stock market, you can lose value as quickly as you gain.
This is a flexible policy which features both term and whole life. You can vary the amount of your premium with universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit.
For this flexibility, you’ll pay higher administrative fees. However, the premium I usually inexpensive compared to whole life, but higher than term life insurance.
How much should life insurance cost?
A healthy 30 year-old man could expect to pay approximately $300 a year for $300,000 of term life insurance. To receive the same amount of coverage under a cash value policy would cost over $3,000.
Life Insurance Quotes
Whether you’re new to life insurance or are reevaluating your current life insurance policy, it’s smart to stay informed. This empowers you with confidence that you have the right life insurance policy to protect your family, one that fits your needs and budget.
See how easy it is to shop online for life insurance. Get your free life insurance quotes today!