Chances are if anyone depends upon your income for support, you need life insurance. The question is what kind, how much, and for how long. There’s a myriad of good life products available, plus the industry is ever changing to meet the needs of each generation.
Life insurance in one form or another has existed since man first was compensated for work…easily traceable to the ancient Chinese, Babylonians, Greeks and Romans. In the USA life insurance companies began during the earliest days of our founding fathers.
TO BEGIN
For starters take a snapshot of your life and earning situation now, and project into the future 5, 10, 15 and 20 years-til retirement. Generally you’ll need little life insurance when you are young, more as your earnings and responsibilities grow, more upon marriage, and more with a family. The younger you purchase a policy the lower the premium rates.
WHO SELLS IT?
There’s a wide variety of excellent life insurance products for you and your family. (There’s even a new product “Pet Insurance” covering veterinary expenses for both injuries and wellness treatments). First and foremost it is imperative to hire a licensed insurance agent: Ask your friends, family, coworkers to recommend qualified individuals.(Suggestion: identify members of a professional association like the National Association of Insurance and Financial Advisors (NAIFA) or Certified Financial Planner (CFP), or Chartered Financial Consultant (ChFC). Examine each policy carefully; compare it with others; read the fine print (it is a legal document) and don’t be shy about asking questions.
LIFE INSURANCE PRODUCTS
There are two major categories of life insurance: TERM and WHOLE.
TERM life insurance is the simplest,and dollar for dollar the least expensive and most efficient. It strictly provides your family/dependents with money to survive if you die.
Usually you purchase term insurance for a year and annually renew it. (As you age it will become incrementally more expensive.) Also consider purchasing Level Term insurance for a predetermined number of years (5/10/20 et) where you annual premium and coverage remain the same. Term is a good way to protect yourself without a large expenditure.
A WHOLE life insurance policy remains in force for the WHOLE life of the insured. The requirements of this policy are set forth when the contract is signed. Unlike term insurance WHOLE life accumulates a “cash value” for the insured which builds up tax free (to the extent provided by law) through the life of owner. You can surrender the policy and bank the cash value after several years, or borrow against the cash value at favorable interest rates. Essentially it is part life insurance and part a savings/investment vehicle.
Other categories of whole life are universal life and variable whole life.
Life Insurance provides peace of mind to the policy owner. Though the selection process can be a bit tedious and confusing, it’s well worth the time and effort.