Any financial topic can be a minefield of emotion, confusion, frustration, and denial. Even an easy decision, like whether or not to buy life insurance, can turn into a volatile topic because it forces people to contemplate their demise while trying to assess their family’s needs. It’s easy to feel overwhelmed by facts and figures. Stick to a few major life insurance concepts to make the best decisions for you and your family and avoid morbid distractions.
Concept 1: Need
Within this concept, you explore whether or not you need life insurance.
- If you die, will your family need to replace your income? A life insurance policy provides your family an easy way to replace your income and maintain their way of life.
Concept 2: Amount
When determining how much life insurance you need, you must decide how much death benefit to buy.
- How much is your annual salary, and how many years of that salary would you like to replace? Your spouse will need time to deal with your loss. The larger your death benefit, the more time he or she will have to grieve.
Concept 3: Type
Different benefits within your policy have other options; you can even enjoy some while living.
- Do you want cash values to build within your policy? If you view your insurance policy as equal parts savings and a hedge against risk, you might want to consider a permanent one like a whole life or a universal one. These policies offer cash value growth, permanent coverage (for as long as the premiums are paid), and access to cash values through loans or policy surrenders.
Concept 4: Purchase
The last thing you must consider is where to buy your life insurance policy.
- Does your employer offer group coverage? Group coverage can be easy and affordable, but it does not offer permanent protection or cash value growth and is rarely portable if you lose your job or take a new position.