Life insurance works differently compared to let’s say, car or health insurance. For the latter, you would have to buy for yourself. As for the case of availing life insurance, you would have to provide for someone else when the inevitable comes. So the question is, when is the appropriate time to get life insurance? Do you have dependants? Are there people who depend on you financially? If so, perhaps you may want to consider looking into options for life insurance.
Once you’ve decided to look into life insurance, you have to determine your beneficiaries. They can include your spouse, children, siblings or even your parents. Calculate the amount of financial support you give them. What happens to them once you pass away?
You can dictate more than one beneficiary if you decide to buy a life insurance policy. A specific amount of money can be allotted per beneficiary listed down.
However, if you currently do not have dependants, there is nothing stopping you from still getting a life insurance. In some cases, parents pay monthly or annual life insurance premiums for their children because the payout is guaranteed upon their passing. It all comes down to personal choice.
Life Insurance Over 50
For you to get life insurance, you must undergo through a process called underwriting. How this works is you would have to answer health questions and undergo a physical exam to be done by a registered nurse. Going through this procedure should be no problem if you are generally healthy. However, if you scale a bit on the problematic side, for example a smoker, you would have to shell out more money than a healthy person would for life insurance.
Amount of Life Insurance You May Need
Consider this as an important step as well. Getting more life insurance means higher costs. It is advised you seek out the help of a no-commission financial advisor to assist you in determining if you need life insurance, and also how much.
Some life insurance agents will urge you to get an additional life insurance not because you necessarily need it, but because they get commissions for this. This in turn may force you to spend on something you do not really need. However, it is really up to you who to trust. Just make sure you do not dwell on unnecessary spendings.
Recommended Types of Life Insurance
Thankfully, you have the freedom to choose which life insurance plan is perfect for you. Of course, this is along with the advice of a financial advisor. There are two main kinds for most life insurance plans: term life insurance and cash value life insurance.
Term life insurance guarantees you a payout during a specified term. There is a premium, normally lower than permanent life insurance, you have to settle annually. As long as you pay religiously, you are guaranteed a life insurance that expires within a certain period of time stated in the contract. It is also important to note that cash value is not applicable with this kind of insurance.
Term life insurance is not recommended to be used for estate planning, etc. Beneficiaries can make use of the payout through funeral costs, debts, healthcare and other things they may deem necessary to spend on. Therefore, you can say that it is good for temporary expenses like your kids’ education or mortgage.
Among the types of life insurance, term life insurance is the least costly as it provides a cash benefit for only a specific time period and only guarantees a death benefit.
Another type of life insurance is cash value or “permanent” life insurance. True to its name, the contract is not set on a specific time period unlike term life insurance. As long as you pay your premiums continuously, your cash value insurance stays. There is a savings component that comes with this type of insurance. That is, in some cases, portions of your benefit can be withdrawn. Of course, keep in mind that this will be deducted to your overall death benefit. With cash value life insurance comes different types of it. There is whole life, universal life and variable life. If you start younger, cash value life insurance is relatively more expensive than term life insurance. But take note that premiums for term insurance become more as you get older, so it may be more practical to consider looking into cash value life insurance instead.
Additional Facts on Life Insurance
Life insurance can serve you multiple purposes. You can view it as an insurance or even an investment.
If you are looking at life insurance as an investment, you may want to calculate the internal rate of return given by the policy. This is dependent on the factor of how long you may live so keep that in mind. In other cases, some people buy life insurance for their parents and consider it an investment. Because of the guaranteed payout, this can be a good strategy for life insurance as well. Some companies also do provide life insurance for people around the age of 80. However, it comes down to personal choice for some people as they see it as a sound investment.
Many doubt that people over their 50’s would still need life insurance. Many think that this is only economical for those who have young children still very dependent on their parents. However, there are also many reasons why a life insurance should be maintained even as you get older. Take for example your financial expenses. No matter what your age, it’s an observable fact that funerals are expensive. Estate taxes can also pop up and are common debts being left out by those who pass away. Apart from all that, the cash benefit from life insurance can also be used as a business succession tool for your family. Regardless of age or health, there is a life insurance for everyone who needs it. This provides financial security depending on your needs as long as you choose wisely.