If you assume a life insurance policy is something only the elderly purchase, think again. If you have people who are financially dependent on you, such as children or a partner who depends on your income to pay the home mortgage, the time to buy life insurance is now.
If you have an insurance plan through an employer, you should be aware of how much it is worth. It may not be enough to take care of your family in the event of a tragedy. A supplemental policy may need to be purchased. The self-employed or independent contractors often don’t have any type of life insurance. But consider this scenario:
A 32-year-old married woman with 2 children sees her doctor and complains of not feeling well. After some medical tests are run, she is diagnosed with a life-threatening illness that she may or may not recover from. While receiving treatment, she is off of work for 20 weeks. Luckily, she had Disability Insurance to help her cover her bills while she was unable to work. However, because she had no life insurance she worried over what would happen to her family financially if she were to die. How would her husband pay the mortgage on their house? What about her $10,000 student loan? Any debts she had, including funeral costs, would be passed along to her family members. No one should have to worry about the welfare of their family, especially while they’re fighting for their life.
There are a few options to consider when selecting Life Insurance. Term Life Insurance provides coverage for a fixed amount of time (For example, 5, 10, or 20 years) In the event of death during this term period a lump sum is paid out (Death Benefit).
Whole Life Insurance covers you for life. A portion of your monthly premium accumulates as a cash value and the insurance company invests this into a tax-deferred annuity (a savings account with a fixed interest rate). So upon death your death benefits are combined with an investment component. One advantage of this policy is you can borrow against it.
Universal Life Insurance covers you for life, and a portion of your monthly premium is invested into a tax-deferred annuity. However, the money is put into more aggressive investments, like bonds, mortgages and money market funds, so the interest rates tend to vary.
The time to buy Life Insurance is when you’re young and healthy as rates will be much cheaper. Preparing for the unexpected brings much-needed peace of mind. Talk to a qualified insurance broker who can help you decide which policy will fit your financial circumstances.
Tiffany Buczek is a freelance writer and licensed esthetician living in southern CA.