When you move into adulthood, you quickly learn that there is insurance for just about everything. Cars, homes, health, and belongings are just a few important areas of life where it’s essential to secure a quality and affordable insurance policy. But are you aware that you can and should also obtain insurance for a person? Specifically, for yourself or your loved ones.
It may be uncomfortable or upsetting to think about yourself or a loved one dying, but buying life insurance coverage is a great way to secure financial protection and peace of mind in the event of an untimely death.
Before purchasing life insurance, though, it’s important to assess your needs, options, and financial situation. It is also important to address a few questions such as: How does life insurance work? Is all life insurance the same? Should everyone have life insurance? When is the best time to get a life insurance policy?
Below we’ve given a few answers to these questions.
What is Life Insurance?
Understanding what life insurance is and how it works is the first step in securing a life insurance policy. Life insurance is a contract between an individual and a life insurance company. This contract specifies that the policyholder will pay a premium for the duration of the life insurance term, and in turn, the insurance company will pay a financial sum to the policyholder’s named beneficiary upon the death of the policyholder. This sum is referred to as the death benefit.
Types of Life Insurance
Life insurance is not one-size-fits-all. You get to choose how much life insurance to carry and what type of coverage you need. There are two types of life insurance policies: Term and Permanent.
Term Life Insurance
Term life insurance is life insurance designated for a specific term. Usually 10, 20, or 30 years. With a term policy, you agree to pay the premium for life insurance coverage and if you die during the specified term, then your beneficiary receives the agreed-upon sum. Though, once the term expires, the contract expires. If you are still living when the term expires, you will either need to secure a new policy if you wish for your beneficiary to receive a death benefit.
Term life insurance policies are the most commonly selected type of policy. This is typical because term life insurance rates are the most affordable and can often be secured for a minimal monthly premium.
Permanent Life Insurance
Permanent life insurance is just that, permanent. These policies are designed to pay a sum to your beneficiary regardless of when you pass away. Another benefit to permanent life insurance is that the cash value grows with tax benefits and can even potentially be used during your lifetime. The two types of permanent life insurance are Whole and Universal. Each has different specifications and benefits.
Because the insurance company has a guaranteed payout at the end of a permanent policy, premiums are more expensive, though they carry a guarantee.
When Should You Get Life Insurance?
The basic rule of thumb is that younger is always better because it is more likely that you can lock in a lower rate when you are younger and healthier. But, the best time to buy life insurance will vary from person to person depending on their life circumstances, needs, and age.
Below is an explanation of how different life events can affect your need for life insurance coverage.
When You Get Married
Marriage is a major life change. Securing a life insurance policy when you get married is a good idea because it can give you peace of mind that your spouse will be taken care of in the event of an untimely death. Likewise, your spouse will have a safety net to take care of themselves when you are gone.
When You Have a Baby
Starting a family is one of the most important reasons to secure a solid life insurance policy. Minor children cannot provide for themselves, therefore losing a parent can be detrimental emotionally and physically. Ensuring that your children are provided for when you pass on is a major responsibility that is provided by carrying life insurance.
When You Accumulate Debt
When you take on debt to go to school or to buy a house and other personal belongings, you of course, fully intend to pay that back. But if you die before you can pay, your family may be left with the burden of paying the debt. Carrying a life insurance policy large enough to cover all of your debt expenses is a great way to ensure that your family is not left with that burden.
If you are alive, healthy, and under age 85, then it is never too late to get a life insurance policy. But, your age will determine your insurance needs and costs.
20s and 30s
Finding an insurance policy to lock in your 20s and 30s is typically going to be your most affordable option. Especially if your medical exam reveals that you do not have any concerning health conditions. This stage of life is when your insurance company assumes the least amount of risk because an early death is the least likely. Though, if you have young children at this time, it is likely one of the most important age brackets to ensure that you have coverage.
40s and 50s
Securing an insurance policy during your 40s and 50s is still affordable, though more expensive than in previous decades. During this time is when there is an increased risk that health concerns will arise, and therefore, more risk for the insurance company. Once you have reached this stage of life, you likely have accumulated assets and financial obligations that require coverage if something were to happen to you, therefore life insurance coverage is still a wise purchase.
60s and Older
Though being 60 and older seems like the most important stage to have a life insurance policy because the probability of passing away is getting closer, it may actually be the stage where you deem life insurance unnecessary. Your children are likely grown, and you may have significant savings and retirement accounts that can provide for your family members that are left behind. But it is still vital to assess your situation because if you do have outstanding debt and responsibilities when you pass, you want to ensure that your family members are taken care of.
Speak with an Agent
Hopefully, this information has helped you to understand the importance of carrying a proper life insurance policy. Are you ready to find the right policy for you and your loved ones? Or perhaps you have more questions that pertain to your specific circumstances.
At Gebhardt Insurance Group, our team specializes in finding the best policy for you. Our expert agents are well-versed in the specifics of each type of life insurance as well as which companies offer policies that will fit your needs and lifestyle the best.
Call us today to speak to an agent about your life insurance needs.