Choosing a life insurance plan can be difficult for a number of reasons. It can be emotionally taxing, and it can be difficult to choose a plan that is right for you from the many options out there. Since life insurance is used to protect your family and loved ones once you die, it can be incredibly difficult to think of that possibility, but it’s a necessary step that should be taken and it can provide you with some peace of mind in case anything does happen to you.
Although life insurance is an incredibly important thing to have, only 54% of adults had some form of life insurance as of 2020. Without life insurance, your family may be left with no way to pay for funeral costs, debt, and even cost of living once you’re gone. Read on to learn how to get the protection you need without breaking the bank.
What is Life Insurance?
Life insurance is an agreement or contract between you and your insurance company. You’ll pay a monthly or yearly premium in order to guarantee that the insurance company will pay a certain amount of money to your family or people you choose after you die. The money the insurance company pays on behalf of the deceased individual is called the death benefit, and the person receiving the money is the beneficiary.
Why Do I Need Life Insurance?
The main reason individuals choose to purchase life insurance is to protect their families if they die. Life insurance will provide your family with immediate income that can be used however they need. This money can be used to cover funeral costs, pay for living expenses, paying off your outstanding debts, and more.
Types of Life Insurance Policies
The two main types of life insurance are term life insurance and permanent life insurance.
With term life insurance, you’ll purchase a life insurance policy for a set length of time, known as a term. A term is usually between 10 and 30 years. Term life insurance expires at the end of the term and has no cash value, and it is the lowest cost option.
Permanent life insurance means the length of the policy is for life. Some companies offer permanent plans to age 65. Permanent life insurance has two different sub categories, whole life insurance and universal life insurance. Whole life insurance has a premium that is set, and it will continue to be valid as long as you pay the premiums. Whole life insurance also builds up over time and has cash value. Even if you surrender the insurance policy without dying, the cash value can be returned to your possession.
The other type of permanent life insurance is universal life insurance, which offers investment options. The premiums paid over time into a universal life insurance plan can change over time, based on how you choose to handle your insurance plan.
Choosing The Right Life Insurance Plan For You
Choosing the right plan for you out of the many options can seem daunting, but examining your priorities and going through the pros and cons of different options can help make your decision a bit simpler. Consider your current income, the amount of life insurance your family would need, your age, medical conditions or health, and more. Many loan companies offer affordable plans for every budget.
If you’re still in doubt, consulting an accountant or financial advisor can help. At Sorge CPA, our financial professionals can help you to make the right choice given your financial situation. Contact us today for help choosing the right kind of coverage at a price you can afford.