Unless you have a crystal ball, it’s unlikely that you will ever be able to predict where the course of your life will take you or when it could come to a grinding halt. That’s where life insurance comes in. But before you buy any plan, make sure you glean from these life insurance tips first.
Understand The Benefits Of Life Insurance
The first place that you are going to want to start is with understanding the benefits of life insurance. According to Gateway Financial, there are several innate benefits of life insurance that you should be aware of.
- Cash payout in a lump sum that protects your family and that can be used as they deem fit to cover final expenses, living costs, debts, and income replacement (to name a few uses).
- Typically tax-free death benefits.
- Typically free from estate tax with proper policy.
- Accrues in value as you pay into it.
- Withdrawn cash is not taxed (policy loans do not count as income).
- Can be exchanged with other life insurance policies in certain cases.
Know What Type of Policy You Need
Before you choose a plan, it’s important to understand what your options are with plans. Life insurance comes with two different, common plans, according to USA Today. These include: life and whole life.
A life plan usually is the cheaper route because it can expire before the benefits are fully used (these plans typically come with a 20-year vesting period). Whereas whole life would cover you throughout your entire life, and can be borrowed against once the plan has accrued in value from you paying in.
When to Choose Term
A term policy is viable for several reasons. One example is for parents who get a term policy to cover them until their children are of adult working age; and are independent from the family and are able to now cover their own living expenses. Once the children have grown up and moved out, the insurance policy may no longer be required. Bear in mind this is just one example, and your situation may warrant whole life insurance instead.
How Much Should You Buy?
Perhaps the most difficult aspect of choosing life insurance is knowing how much that you should buy. It’s really going to come down to the math that revolves around your particular situation and lifestyle. To better help you decide, Bankrate offers a life insurance calculator that can enable you to more easily assess your needs.
Take your time when choosing a life insurance plan. Talk to your existing insurance agent to see if you can get group discounts by adding a life policy and to learn more. Be sure to also consult with your financial advisor and your CPA to learn about any financial or tax implications that may arise.