Sadly, life insurance always seems to be the last on the list of priorities, mostly because we simply don’t think of our own mortality, and second, the mortgage, food and car payments always take precedence.
But, life insurance can mean the difference between a family member surviving financially, after a death, and the ability to cover the burial and funeral costs, which in this day are pretty substantial. Although, there are other options, but we’ll cover those later.
There are many different types of life insurance plans, and doing the research before even contacting an insurance agent would be wise, to understand the best benefits for your dollar. And a good basis for your research is to figure out exactly how much you think your family will need should something unexpected occur.
Figuring out where you are financially, as far as the balance on a mortgage, and other big-ticket items should be considered. Also to consider, is whether your spouse is able to support him or herself without your income, or if the insurance is meant to be an income-generating annuity they will need to live on.
This analysis should all be taken into account before you even begin shopping for life insurance. And once you do, making your decision on which plan will be much easier.
The major life insurance plans are pretty simple.
Term life insurance
Term life is probably the most affordable life insurance, with rates that are affordable, which allow larger face value plans, than most families could afford otherwise.
A million dollar life insurance plan, for a 45-year-old non-smoker could be bought for about $2,600 per year, or around $215 a month.
It is easy to qualify for and nearly every insurance company can sell you Term life. The downfall is that it expires. If you outlive the expiration date, you get nothing back, meaning you would have spent possibly thousands, some, tens of thousands for a policy you didn’t even use. There are no refunds, and some might think it was a waste of money.
Whole Life insurance
Whole life is more permanent, as long as you pay for it year after year. These policies never expire, and since we are all going to die someday, you know your family will be left with something.
It’s basically a savings account, because they accrue a ‘cash value’ that is tax-deferred, and can be borrowed against, or used in retirement. For people who just don’t save money, this can be lifesaver in times of crisis or need. As long as you are aware every dime that you take out, lowers your life insurance benefit.
The problem with this popular life insurance is that it is expensive. Being able to afford the premiums could be difficult, to get the coverage desired. Make sure you pick a face value that is affordable, because if you pay for a few years, and then stop, the surrender value won’t equal the premiums paid until the policy is at least 12 to 15 years old.
And, shopping for this policy will be difficult. Whole life insurance causes a lot of confusion and is sold based on having a ‘cash value’ and dividends, many times overlooking the long-term effects. This insurance is definitely one you should consult a life insurance agent about, and make sure that you analyse all of the fees, charges, and terms before buying.
Return of Premium
This policy is what is known as ‘a compromise’ in that it isn’t as cheap as term life, but it is much more affordable than Whole life. Also, it holds a return of premium, meaning that if you outlive the policy, you get all of your money back. So, whether you live or die, the policy is paid out.
It costs approximately 50 percent more than a term life plan, but they are less confusing than Whole life, and much more affordable.
The downfall is that all of the money you invest gets paid back, yes, but you could have earned interest on that money in the 30 years or so, the policy was paid. None of that money earns a single dime of interest. Yes, it is great if a spouse passes away, but then again so is a mutual fund, or Certificate of Deposit.
Kristy Ramirez writes for Life Insurance Finder where she helps people to compare quotes and select the best life insurance policy to meet their needs at the best possible price.
I have policies like this, but I support less expensive and more organic forms of burial, like a shroud.