Life insurance

The question of whether or not you should buy life insurance depends on your individual circumstances. A good life insurance policy protects your financial responsibilities and your family, business and other dependents after your death. The purpose of owning a life insurance policy is to help your family and dependents to carry on without your income, as well as to cover debts and final expenses.

There are many types of life insurance policies from which to choose. Selecting the right type of life insurance policy is important and, sometimes, a difficult decision. You want life insurance with enough coverage to allow your family to pay off debts and be able to adjust to life without your income. If you have young children or if you have debt, you may need to adjust your life insurance coverage so that your children will have childcare, educational expenses and health care. You do not want to burden your family while they are grieving with worries of paying off debt. Therefore, a policy that pays off debt, mortgages and other loans, in addition to replacing your income, would be a blessing to your family in their time of need. You want enough insurance to cover expense until your dependent children are grown and until retirement benefits kick in for your spouse.

As a rule, most financial planners state that you should have enough insurance coverage to replace 10 years of your salary, if possible. For example, if your salary was $50,000 per year, a policy with death benefits of $500,000 would allow your family to live the same lifestyle as if your were bringing home the same salary each year.
The biggest decision in buying life insurance is the amount of coverage. But there are different types of policies to consider. Some policy types pay a lump sum or death benefit to your beneficiaries. Other types of life insurance provide not only a death benefit but also build cash value. They are like a savings account and are also called cash value policies. Policies that have an investment component can cost more.

You may want to choose a life insurance policy that provides fixed premium that does not increase as long as you pay the required premium. Or you may consider a life insurance policy that has flexible premium. There are also policies that give you a right to withdraw or borrow against the policy.
When you shop for life insurance your premiums will be based upon several factors. The type of coverage and policy you choose, in addition to your age, health, sex and any potential occupational hazards. For example, if you jump out of planes for a living your premiums may be more than if you were a store manager.

Choosing the right type of policy can sometimes be confusing. There are many different types of policies from which to choose. Basically, the two main types of life insurance policies are called whole life and term insurance.

Whole Life Insurance is a permanent insurance policy that combines life coverage and builds cash value. It pays a death benefit to your beneficiary and offers a low risk cash value account with tax-deferred cash accumulation. The premiums are fixed. You can choose to receive dividends that you can use to reduce premium payments and an option to withdraw funds or borrow against the policy.

Term Life Insurance has no investment options and provides coverage that lasts for a set period of time as long as you pay the premiums. A Term Life Insurance policy can have an annual renewable term and is purchased yearly without having to have a medical exam.
If you purchase Term Life Insurance while you are younger the premiums and annual renewable premiums are less expensive than if you purchase insurance when you get older. As you age the premiums will increase. You can purchase a level premium term that initially is somewhat higher but remains a fixed premium for a longer period of time, even up to 30 years.
In summary, Life Insurance is necessary. Choosing the right type of policy and best amount of coverage will be determined by many factors, the most important being the protection of your loved ones in the event of your death.