Are you wondering if you should purchase life insurance? If there is someone who is dependent on you for financial support, it is a beneficial thing to have. It can ensure that your loved ones are not struggling to pay the bills if you pass away. It can also help them replace the services that you provide. For example, if you are a stay-at-home parent, having life insurance can allow the other parent to pay for daycare.
There are many types of life insurance products available, so before you contact an insurance agent, make sure you have a basic knowledge of the options that are available.
The major advantage of a term life insurance policy is that if you are young, you generally pay extremely low premiums for a substantial death benefit. However, as you get older, your premiums will increase when you renew or purchase a new policy. Term insurance is usually the best option for someone who anticipates only needing insurance for a limited period of time (e.g., until the mortgage is paid off or the kids are grown). If you plan to have life insurance for the rest of your life, long term, cash-value insurance may provide a better deal.
If you have life insurance through your employer, it is probably a term policy. The death benefit for employer-provided life insurance policies is often equal to one year's salary. Having insurance through work does not mean that it is not beneficial to purchase a policy on your own. While a work policy may be enough to cover funeral costs, it is probably insufficient to cover outstanding debts or support dependent family members. Additionally, you may lose the policy when you leave your job.
The downside of cash-value insurance policies is that the premiums tend to be considerably more expensive than for term plans. Before you buy this type of insurance, think about if your situation justifies paying the extra cost.
There are three basic types of cash-value life insurance:
Life insurance protects loved ones who depend on you for financial security and is a sound part of many long-term financial plans. However, as with all purchases, you want to make an informed choice. Most insurance agents make their living through commissions, so look for and resist high-pressure sales techniques. Before purchasing a policy, check out how the company is rated by a rating agency, such as A.M. Best, Moody's Investors Service, and Standard & Poor's, to make sure the life insurance company will be around when you need them to be.
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