I ain’t Dead – How to choose a Life Insurance
Life insurance is a promise from an insurance company to pay a specified sum to someone you choose — your beneficiary — at the time of your death. One of the best uses of life insurance is to protect anyone who relies on you financially, such as a surviving spouse or dependent children. Life insurance also has more advanced estate planning uses, such as preserving cash flow to pay estate taxes.
Two basic types of life insurance are available: term and permanent. Term life insurance remains in force for a specified period of time. Permanent life insurance includes a savings component, which you can withdraw or use to help pay premiums.
Life insurance can vary widely in cost, from as little as about $500 a year for a young, healthy term applicant to 10 or 20 times as much for an older, permanent life applicant — and even more for smokers.
The easiest way to save money on life insurance is to buy a term life insurance policy instead of a permanent one. Term insurance offers no savings component, which means all of your money goes toward insuring your life.
Permanent life insurance lasts a lifetime instead of 10 or 20 years like Most child life insurance policies. In addition, permanent insurance — including whole life insurance — always has an additional savings or investment platform, and that costs money.
You can visit an agent for an in-person evaluation, but many insurance issuers will give you quotes over the internet if you provide your basic medical and demographic information. However, the lowest price you receive might not be the best policy for you.
Insurance can be expensive and you shouldn’t buy more than you need. But you might not quite know the answer to the question, “How much life insurance do I need?” To figure that out, decide what you’ll want covered in the event that something happens to you.
To replace lost income, one formula suggests that you should buy coverage equal to 15 times your current salary, which means your beneficiary would likely get 75 percent of your salary.
When you’re shopping around for life insurance, don’t forget to ask what discounts are available — they might vary among companies. For example, some companies might offer discounts if you buy certain levels of life insurance, such as $250,000 rather than $200,000.