Protecting your family is the single most important thing any individual can plan for during his or her life. Life insurance protects you and your family from economic hardship as a result of death. One of the most important thing to remember as a parent is to make sure the welfare of your children are taken care of in the event of your death.
There are several types of Life insurance to choose from. The first thing you need to decide is how much coverage you might need.
1. How much can your family afford to pay off your mortgage loan or your rent if you die? 2. How much debt will you leave behind to include credit card balances, car loans, student loans, personal loans etc.? 3. How much annual income will your death remove from your household? 4. How much will the funeral you desire cost?
Once you have determined all aspects of your financial needs then you can figure out how much life insurance coverage you will need. Usually it works out to be about one and half times your yearly salary. Remember to take into consideration if you already have a 401K, CD’s, stock, bonds, or mutual fund accounts either with you work or set aside for a nest egg. There basically are four types of Life Insurance that can meet your needs.
Term Life Insurance:
This type of life insurance is the least expensive and the simplest of life insurance policies. This life insurance policy does not accrue any cash value, and is fixed on the time period it covers. Usually from 1 to 30 years which can be renewed. It pays the beneficiary of your policy a fixed amount if you pass within the time frame of your policy.
Whole Life Insurance:
This type of life insurance does accrue a cash value. The cash value usually builds up over time and has a tax-deferred basis. This type of life insurance is more acceptable to people who want to have a nest egg as they grow older because it does have the cash value aspect to it. Therefore you can use some of the cash value if necessary before you die for your children’s education or any other need that might come up.
Universal Life Insurance:
This type if life insurance is a very flexible policy and it accrues interest. The death benefits and premiums can be adjusted according to your life situations. Your policy will stay in effect as long as your cash value can cover the cost of your policy.
Variable Life Insurance:
This type of life insurance is for people who want have their life insurance policy coincide with the financial market. You can decide how much you invest your policy; therefore your cash value can grow faster. But if the market is bad then your death benefits will be bad.
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