Life insurance, a security for loved ones
Life insurance is a critical part of protecting those that you love. While you hope you never have to use it, the fact is, people do have to, and over 60% of people are either not insured, or are underinsured. The following is a look at knowing when to buy insurance, how much to get and the best type for you, term or whole, as well as whom to buy the insurance from:
When to buy life insurance:
There is no magic age or date that life insurance should be bought by, rather your circumstances dictate whether or not you should have life insurance. For example, if you have dependant children, have people rely on your income for support, etc. then it is critical that you have life insurance. As a husband, what would you do if your spouse died? Usually without children your income would be enough to get by on, but if you have kids, you may need to pay someone to watch them, and will have more expenses such as college tuition costs, etc. which means life insurance becomes a more important insurance to have.
How much life insurance you should buy:
The best way to figure it out if you do not want to spend a lot of time is to take your current annual income and times it by 6-12, and get that much insurance. You can up that amount or lower it depending on how many children you have, how many debts you have, and any other special needs. If you want to be more mathematical about it, consider a conservative percentage of average annual return. You want to replace lost income with annual dividends. So, for example, if you make $45,000 a year, and you want to do a 6% dividend, then you would need $750,000 of coverage. If this does not work for you either, then go online to the various life insurance companies you are familiar with. Many have online calculators that will help you determine how much coverage you need based on your situation, income, etc.
How to choose the best type of life insurance:
Term coverage, is pretty easy to understand. You get to decide how long you want to get coverage for at the set rate. You can get 5 year, 10 year, 15 year, 20 year, 25 year, and 30 year terms. Usually the longer the term, the more expensive the insurance is because it guarantees you insurance at a set price for that long. Most also comes with a renewal guarantee, meaning that at the end of the term they will for sure insure you again, but your premium may change again. If you buy whole life, you pay more because you are buying coverage that lasts for your whole life, as long as you pay your insurance, some of that premium is set aside and is invested. You can make withdrawals from it, tax-deferred, or borrow against it, and if you cancel it, you may get some money back at the end.
Where should you buy it?
Buy it from a company you are familiar with, that you trust, that has good standing with the BBB, a strong financial record, etc.