What You Need to Know About Life Insurance

June 6th, 2019

Most insurance protects you and helps you cover costs when something goes wrong. It’s a little tougher to think about life insurance, which is designed to provide for others in the case of the insured’s death. If you’re starting to think about purchasing a life insurance policy, you should be thinking about the people who depend on you financially, and an amount that will adequately provide for them.

Who are your financial dependents?

Your financial dependents can include anyone, but are typically your spouse, children, or parents—anyone who depends on you financially. In this scenario, it’s helpful to tally up the amount of support you provide, which will make it easier to determine the amount your policy should provide if you are gone.

This is a deeply personal choice. Some people purchase life insurance even though they have no dependents. Others add multiple dependents to the same policy. Others still figure their dependents will divide whatever remains.

How do you get life insurance?

Some life insurance policies require underwriting. Underwriting typically includes a medical exam and answering questions about yourself, which helps determine the amount you’ll pay. Poorer health often means you will pay more for your premium than a healthier person.

How much life insurance do you need?

Most life insurance falls into one of two categories: term life insurance or cash value life insurance. Term life is similar to other insurance policies, where you are insured as long as you pay your premium. Cash value life insurance means that some of your premium will cover the cost of your policy and some will be put into a savings account. There are many varieties of this type of policy.

Term life is usually better for temporary needs, while cash value life insurance works well for permanent needs.

Regardless of whether you choose a term or cash value life insurance policy, deciding whether you want to think of it as insurance or as an investment can help guide you to the decision that’s right for you.

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