Do you have life insurance? If not, you’re like many people in the United States, as around 40% of Americans don’t have coverage. But as a parent, you have people who depend on you, which means you need to consider life insurance sooner rather than later.
Take a look at everything you need to know about getting life insurance to protect you and your family.
How Does Life Insurance Work?
This protection effectively works as a replacement for whatever income your beneficiaries lose when you pass away. If you die while you have life insurance, your insurer pays your beneficiaries a tax-free lump sum called the death benefit. These individuals can use the funds to pay for rent, groceries and other expenses.
It’s important to note that the money varies in amounts depending on three factors: the coverage amount, the policy’s length and the policyholder’s health. There are different types of life insurance to consider. Likely, you’ll choose between term life insurance and whole life insurance, but you might want to look at every option.
Different Types of Life Insurance
There are around eight different types of life insurance. These kinds come with various stipulations, so you should consider each choice to find one that suits your situation best. Here’s a quick look at some common types: term, whole, and final expense.
Term Life Insurance
Many people choose term life insurance because you can enjoy the most straightforward plan. It lasts for a set period, which eventually expires. If you die before the policy ends, your beneficiaries will receive whatever premiums you paid up until then. This money can go out as a lump sum, annuity or monthly payment.
Whole Life Insurance
Unlike term life insurance, whole life insurance lasts for your entire life. This option has a savings account in addition to a death benefit, otherwise known as the cash value, which you can withdraw from as a loan. These plans are more expensive, and you’ll also have to consider variables like taxes, interest and more.
Final Expense Life Insurance
If you don’t want complete life insurance, you can use final expense life insurance to cover funeral costs — and when the average funeral amounts to around $10,000, you may need help. This policy can help your loved ones afford your burial or cremation, which usually makes the most sense for older adults who don’t have the liquid cash to afford such expenses.
Keep in mind that each plan will have different premiums and payouts.
Which Variables to Consider
All life insurance plans come with premiums. That’s how much you’ll pay monthly to keep the policy. These rates differ according to specific factors, including your age and health. It’s a smart idea to know which variables can affect your monthly expenses.
Keep in mind that your age will impact your premiums. If you’re older, you’re a potentially at-risk individual because you’re more likely to pass away. That’s why some people sign up for life insurance in their late 20s and early 30s. It’s the cheapest time to get life insurance, as your insurer likely won’t have to pay the death benefits any time soon.
Before you get approved for life insurance, your insurer will check your health history. There may even be a required medical exam to further evaluate your wellness. This data helps insurers check whether you have any specific conditions, such as heart disease, which make you more at-risk. Habits like smoking will make a difference, too.
Occupation and Hobbies
This point might seem confusing, but your job and interests matter, too. If you work on an oil rig and love to go skydiving, your insurer may need to pay the death benefits sooner rather than later. Exactly which activities matter will depend on the insurer you choose.
Remember these points as you shop for life insurance.
Why You Shouldn’t Wait to Get Life Insurance
Remember to consider your current situation as you look into life insurance. There are scenarios when life insurance makes sense — and times when you might prefer to wait a few years until you explore policies. Let’s take a look at why you shouldn’t wait to purchase life insurance as a parent.
It’s critical to consider life insurance whenever people rely on your income. If you have a spouse and kids, you must consider life insurance. This way, you can rest assured your family will be financially stable should you suddenly pass away. This coverage might not seem like an immediate need, but you never know what’s going to happen tomorrow.
However, you might want to buy health insurance early so you can enjoy lower premiums. If you intend to get married and have children in the future, you could benefit. It all depends on your situation. This policy might play a crucial part in planning your eventual family.
Get Life Insurance Early to Protect Your Loved Ones
While life insurance may not seem too important, your family can benefit when you have a plan in place to deal with unexpected events such as an untimely death. If you have people who depend on your income, you want to protect them. That’s exactly why life insurance can help.