About Life Insurance

The answer to whether or not you need life insurance is a personal one depending on your financial, personal and other circumstances.

You can consider purchasing life insurance if you fall in one of the next categories:
•  You are married and spouse depends on your earnings.
•  You have children.
•  You have an aging parent who depends on you.
•  Your retirement savings will not be enough for your spouse to live on.
•  You have property and expect to owe estate taxes.
•  You have a business, in particular if you have a partner.
•  There is a joint financial obligation for which another person would be responsible after your death.

What kind of life insurance do I need?

There are different types of life insurance, but they usually fall into two segments: term insurance and permanent insurance. Permanent life insurance is designed to protect you throughout lifetime. It comprises two basic lines, namely whole life insurance and universal life insurance. Term life is the most popular type of life insurance policy as it suits most people's needs. You can choose a term length from one to thirty years. The company will pay benefit only if the insured dies during this specific period or term. If you have long term needs, you can opt for permanent life policy. Whole life insurance is a well-known type of permanent insurance coverage with fixed premiums.

How much coverage do you need?

There is no simple answer to this question. The financial advisors say you need enough insurance to replace 4-8 years of your income. If you have children or significant debt, you should increase the coverage to replace ten years of your salary. That means a person earning $30K dollars a year should have from 150K dollars to 300K dollars worth of coverage.

The Whole Life Insurance

Whole Life Insurance provides coverage for your whole life and requires premiums to be paid each year. It is the right choice if you want to ensure that you have an insurance policy in place for entire lifetime and can comfortably pay premiums which will never increase. Also, some people choose a whole life insurance policy to aid in their retirement planning. The whole life insurance has a guaranteed cash value which commonly is increased based on a predetermined schedule during the life of insurance policy and which should equal the death benefit upon maturity of the policy. Cash value in your policy will increase slowly in the first years and gradually the amount will grow more quickly. Since premiums stay the same, the younger you are when you buy insurance, the cheaper premiums will be. The whole life insurance is more expensive then term insurance but premiums are guaranteed never to rise.

The Term Life Insurance

The term life insurance policies offer coverage for a fixed period of time (term) only. You can pay premiums monthly, quarterly, or annually (almost always the cheapest option). Term insurance is the simplest and one of the cheapest types of insurance coverage that stays in force for a certain period or age of the insured. The insurance company pays a death benefit if the insured dies within the policy's term but don’t pay if the insured outlives it. Moreover, (as opposed to whole life) whereas it premium cost is low in younger years, it usually rise with the age of the insured. You may opt for a 5 year term, 10 year term, 15 year term, 20 year term, 25 year term or 30 year term. Some term life insurance policies may be kept up until age 65, 80, 90 and 95, but the most companies will not sell term life insurance to an applicant for a term that ends past his or her 80th birthday. The term life insurance has no cash value accumulation or equity and so it is mainly purchased for the security provided by the death benefit. There are two basic forms of term life coverage: Annually Renewable Term Life and Level Term Life. Premiums are lower for Annually Renewable Term Life Insurance but can rise when you renew your policy. For the Level Term Life Insurance, premiums are initially higher but remain level for a set period of time, generally 10 or 20 years. You can renew your policy if the insured period needs to be extended. The simplest form of term insurance is a one-year contract. This form is the least recognized among all term policies. Most of the term life insurance programs comprise an option to convert the policy to a universal or whole life policy.