The life insurance industry has been misunderstood when it comesdown to the sale of life insurance policies. Folks mustappreciate the fact that dying is just a part of life.
There are many things that must be considered before purchasing any life insurance policy. There are 3 main types of life insurancepolicies to look at Term, Endowment and Whole Life. Let’s take a look at these three.
Whole life insurance is designed to cover you for your wholelife. When you pay your monthly premiums a portion goes to payfor your life insurance while the rest goes into a savingsaccount. This savings account builds what is known as “cash value”that you can borrow against, if needed, after it builds, but itmust be repaid.
These Whole Life Insurance policies “mature” whenthe insured individual turns 100 years old. At this point, theinsurance company will cash out the insured person for “facevalue” and cancel the policy. Face value is the amount that thepolicy would have paid in the event of the death of the insuredperson.
Endowment insurance policies are designed to be paid for aspecified amount of time until the policy “matures”. Some reasonsfor Endowment Insurance could be college tuition, retirement,ect.. Endowment policies are normally more expensive as they’redesigned to be paid in full after a certain period of time ratherthan being paid over the period of the insured person’s life.
Term life insurance is the least expensive type of policy thatyou can buy. These policies can be purchased for a specific timeperiod or “term” just as the Endowment policies, however there isno cash value accrued with term insurance policies.
Term policies are perfect for those that need additional securityover a specific time frame. An example would be the breadwinnerof the family needing additional insurance coverage during his or her working years when they would have more obligations to meet.
Before buying any life insurance you need to sit down, with yoursignifigant other, if you have one, and go through every bill that you have.Seperate these bills by figuring out what your regular monthly expenses arefor your household and how much you have going out in payments that willeventually be satisfied.
Examples of payments that will eventually be satisfied are car, boatfurniture, home, ect. These should be figured into the amount of coverageneeded in order to pay these off in the event of the death of the breadwinner.
The other pile will include what your living expenses will be like withoutthose payments. This pile should include homeowner’s insurance, life insurancefor the surviving family members, food, utilities, clothing, ect.
You’ll also need to take into account the loss of income from the breadwinner.This can be tricky, especially if you have children. You’ll need to take intoaccount their ages, how many years they have remaining in the home, medicalinsurance, dental insurance, school expenses, ect.
Finally, you’ll need to allow for enough money to survive in the event that you’re unable to work or simply need to take a period of “healing” time.The passing of a loved one is never an easy event, but it’s made much worse whenyou’re not allowed the time to gather yourself before being thrown back into theroutine of life.
The things mentioned above are designed to give you some ideas as to what youneed to be taking a look at. Each family and individual has different needsand expenses though and you’ll need to take your time when doing your financialinventory.
For more information about the different types of life insurancethen you should contact a licensed agent and set up anappointment at your earliest convenience.
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