As someone in their 20s, you probably won’t have to buy life insurance on your to-do list anytime soon. But life insurance really has nothing to do with age. If you’re engaged, married, or even expect kids in the near future, it’s a good idea to at least start researching life insurance possibilities.
The rule of thumb is that you need life insurance if someone else depends on your income. That could be your children, spouse, or even parents. In this blog post, we’ll focus on when it’s absolutely essential to have life insurance: when you’re starting a family.
What exactly is life insurance?
Our Munster insurance company defines life insurance as an insurance policy that provides a lump-sum benefit payment to a chosen beneficiary or beneficiaries in the event of the insured’s death. Life insurance often helps the beneficiaries pay for expenses that would normally be covered by the insured, and also assists beneficiaries to cover basic postmortem expenses.
Types of life insurance
You can review this in greater detail by clicking here, but here are the three main types of life insurance:
- Term Life – This policy provides beneficiaries with financial help for a fixed period of time following the death of the insured. A term life policy provides support during the working years of the insured, allowing the family to continue meeting previously arranged financial goals, such as paying off a mortgage or student loan debt. Keep in mind that term life insurance is often times the least expensive option.
- Whole Life – Simply put, whole life insurance provides financial protections for the whole lives of beneficiaries in the event of the insured’s death. Whole life insurance plans have fixed payments and are a permanent life insurance investment. This plan makes for a great way to plan ahead for a transfer and protection of wealth in the event of the insured’s death. In addition, whole life plans can be subject to tax-deferred wealth accumulation.
- Universal Life – Keep in mind that with universal life insurance, premium payments and coverages may be raised or lowered throughout the life of the insured. That allows for some financial flexibility during the insured’s lifetime. The flipside, though, is that universal life insurance usually costs more than term life insurance. Similar to whole life insurance, universal life insurance has the potential for tax-deferred accumulation of funds.
Start planning for life insurance coverage today
If you’re a planner, it’s a good idea to start mapping out your life insurance needs before your first child is born. For example, a married couple may want to take out policies for each other, even if both spouses work. It’s getting more and more difficult for couples to rely on just one household income to pay monthly expenses, so if one spouse dies, life insurance becomes all the more important.
Another advantage to buying life insurance at an earlier age is that insurance gets more expensive the longer you wait. Not to mention, it can be incredibly difficult to get life insurance at all if you were to develop a medical condition. That’s why our insurance agents advise getting life insurance at a young age when health isn’t a factor.
Buying life insurance
Now that you’re ready to buy life insurance, it’s time to figure out how much you need. First, multiply your annual income by the number of years you want the insurance to cover. Then, add any fixed expenses, such as a child’s college tuition. Your last step is to subtract any non-retirement savings or investments you have that could cover some of these costs in place of an insurance benefit.
Where Our Home Insurance Company Comes Into Play
At Gutierrez Family Agency, we offer a variety of options for life insurance policies that tailor to not only your future goals but also the well-being of your beneficiaries. We understand that life insurance can be a touchy subject, but also know that your loved ones deserve financial stability and peace of mind to live comfortably, even when you’re gone.