Life insurance is often seen as a highly complicated product. This perceived complexity is a big reason why some might have hesitation when asking the question of whether life insurance is right for them.
If you’re weighing the costs and benefits of opening a life insurance policy, just think: You wouldn’t buy a home without insuring it, nor would you drive without auto insurance. Life insurance can provide financial security to you and your family, offering protection when it might be needed most.
That said, the question of “Is life insurance right for me?” is a daunting one to answer. To help, let’s explore the concept of life insurance in more detail, how it works, what value it might provide to you and how Bank Midwest can help you find the right policy.
Life insurance is right in most all cases, even if you’re young
Life insurance is designed to help your loved ones financially when you’re no longer around to contribute. It’s fundamental to planning out your personal finances, as mortgage payments, credit card debt and other bills will still need to be paid when your income can no longer be depended on. In exchange for paying a monthly premium, you can get a set amount of insurance coverage. Upon your passing, your beneficiaries (likely your family) will receive a death benefit, which they can use to cover regular expenses or remaining debts.
A lot of the time, people in their 20s, 30s and even 40s don’t give life insurance much of a thought. For one, it means addressing an uncomfortable question, but more to the point, many think a policy simply isn’t right for them given their age and family position.
Quite to the contrary, opening a policy when you’re relatively young and healthy could be most advantageous. You’re likely to get the most favorable rates and terms at such a point in your life. If you wait too long, a policy will be more expensive. Also, the more time it takes to open a policy, the more risk you face that an unexpected event could leave your family with no coverage or financial help.
Which type of life insurance may be best for you?
It’s one thing to know that life insurance is right for you, and it’s another to know exactly which type of life insurance is most optimal. There are a few different types of policies to understand before deciding. These include:
Term Life Insurance
This is life insurance that has an expiration date. Terms often last 10, 15, 20, 25 or 30 years. Your family is covered by the policy from when you take it out to when the term finally ends. This type of life insurance is often sought by younger individuals and families, as they are less sure about their future needs, but know they need protection now. Many try to sync up a policy with a financial obligation or goal. For example, a homeowner with 25 years remaining on their mortgage might take out a policy of the same length.
Let’s say you’re 30 and plan to have kids soon. In that case, signing up for a 30-year policy would lock-in your premiums for the next 30 years. At 59, you would be paying the same amount per month as you did at age 30.
The tradeoff is that the starting average premium for a 30-year policy is a little more than say, a 10-year policy, precisely because you’re locked in. You also don’t necessarily know how much your life circumstances will change in 20 or 30 years – what types of new expenses you’ll incur, your income, inheritances, etc. In the long run, though, there’s a good chance that a 30-year term will be cheaper than three consecutive 10-year terms.
Whole Life Insurance
Whole life and term life both provide a death benefit — and other benefits that we’ll get into later — but with very different policy structures: A whole life policy never expires. The main advantage with a whole life policy is that it builds cash-value. A portion of each premium payment you make is put away in a different account that can be invested or accessed through a loan.
universal Life Insurance
A universal life policy is another form of permanent life insurance, like whole life. The difference is that it gives the policyowner much more flexibility in terms of premiums and cash value. Whereas a term or whole life policy locks in your rate, a universal policy allows you to pay what you’re able to or want to with each premium. It also allows you to adjust your death benefit during the course of the policy, which can’t be done with other types of life insurance.
In summary, signing up for a life-insurance policy (whole or term) sooner rather than later can help you lock in lower premiums. If you have dependents such as children, a spouse or parents you’re caring for – and lack significant wealth – it may be in your best interest to purchase a policy even if you are relatively young. Should anything happen to you, you have the peace-of-mind to know that you’ll leave your loved ones with the financial means to settle any remaining expenses, cover the costs of a funeral and have some money left over for the future.
Looking for more than a death benefit?
Looking for more tools to protect your family’s finances? Life insurance can be the solution. Many policies offer more than a death benefit in the form of riders and other perks. Riders are optional adjustments that you can make to your policy to increase your coverage and to better fit your needs. Common riders include:
- Accidental death and dismemberment: This rider extends your coverage and can provide for your family in the event of an accident that leads to a disability or death (i.e., an accident involving public transportation.
- Long-term care: If the policyowner needs funds to cover long-term care expenses, this rider can be activated and will provide monthly payments to be put toward health care.
- Premium waiver: Life happens, and if the insured is at some point unable to meet the monthly costs of a policy, this rider can be enacted to waive premiums after that event so that coverage is not totally lost.
In addition, a life insurance policy can open doors to other benefits and savings. Many life insurance companies will give policyowners discounts on health and wellness products and services, like paying for a gym membership. You can research different providers to find the best offer for you.
How to have a conversation about life insurance
Conversations about life insurance may be difficult to start, but they are necessary to have. Some tips are to:
- Start early, when there’s enough time to lock in a favorable rate and coverage option.
- Be open and honest with your family.
- Seek the help of a professional.
While the benefits are straightforward, it can still take a lot of time and effort to find the ideal policy. Don’t wait to start thinking about life insurance. The sooner you consider your options, the more choices you’ll have available to you.
Bank Midwest can help make this process easier on you by connecting you with an insurance agent, who will guide you through your choices.
Contact us today to learn more about life insurance and how to get it.