The topic of life insurance is an important one. While you live and breathe you’ll do anything to support and protect your family. If you’re not here the money created by a life policy may be critical to their success.
No one wants to think about what will happen to your loved ones after you’re gone. But it is a noble discussion to have and a reality that you’re better off preparing for than avoiding.
Consider the financial impact. Will your family be able to pay the mortgage or rent? How will they cover day-to-day costs like groceries, bills, debt payments, children’s activities & sports, etc.? If you’re not convinced that your family will be financially safe if something were to happen to you, it’s time to investigate life insurance policies.
Benefit of life insurance
Death benefit for beneficiaries
Types of life insurance
What is term life insurance?
Term life insurance is an insurance policy that has a set expiry date. For example, you can buy term life insurance for 10 years, 20 years or even 30 years. Some policies may even set a specific age for your policy. For example, your policy could be in effect until you are 65 years old. After that time or term has passed, your coverage may end or renew with much higher premiums.
Term insurance is considered the most affordable and straightforward type of insurance policy available. If you pass away before your term is up, your beneficiaries will get a lump sum of money. When your term life insurance is close to expiring, you’ll have a few choices. You can let it lapse and go without an insurance policy. You can choose to extend your coverage, but your premiums will be higher. Another option is to convert your term life insurance over to a whole life insurance policy.
Pros of term life insurance
Simple. A term life insurance policy is simple and easy to understand. So long as you continue to pay your premiums, your beneficiaries will get a death benefit when you pass away.
Affordable. Most term life insurance policies are the most affordable forms of life insurance available, making them an attractive option for those on a budget.
No medical. Another benefit of many term life insurance policies is that you won’t have to undergo a medical exam. There will be a series of questions that you’ll need to answer, and your coverage and premiums will be based on your answers.
Flexible. A term policy can be cancelled at any time without penalty fees.
Cons of term life insurance
When is term life insurance the best option?
How much term life insurance should I buy?
Calculating how much life insurance you need
To figure this number out, take your annual income amount and multiply the number of years that you’ll need protection. Then add in all your debts, like your mortgage, credit cards, etc. Next, you’ll need to add in your family’s future needs, such as children’s education costs, funeral costs, etc. Take that number and subtract all of your assets, like your savings and investments. That final number indicates how much life insurance your family will need when you pass away. Here’s an example: If your annual income is $60,000 and you will need 10 years of protection, and your mortgage is $450,000, the calculation will look like this:
$60,000 x 10 + $450,000 = $1,050,000
It’s a good idea to buy life insurance for both you and your spouse. This ensures that whenever one of you passes away, your family will still be able to meet their expenses without the added burden of financial struggle.
What is permanent life insurance?
Pros of whole life insurance
Guaranteed premiums. You will be offered guaranteed premiums when you buy a whole life insurance policy. This means that your monthly premiums will stay the same for the duration of your life insurance coverage.
Guaranteed death benefit. Just as with your premiums, the benefit of your whole life insurance will stay the same throughout your coverage.
Long-term coverage. A whole or permanent policy will last your entire life unless you cancel it. This can give you peace of mind that your life insurance won’t run out, and your beneficiaries will be provided for when you pass away.
Cash value. You can get life-long insurance coverage along with a savings account to ensure a strong financial future.
Dividends. Some whole life insurance policies also come with the option to earn dividends. You have several options when you receive these dividends, including taking them as cash, reinvesting them into your life insurance, or even using them to pay your premiums.
Cons of whole life insurance
Expensive. Whole life insurance costs more than term life insurance policies initially and the coverage will never end. Insurance companies need to be able to pay the death benefit to those they insure, which is why policies that are more likely to pay out will come with a higher cost.
Complicated. Permanent life insurance policies are more complex than term life insurance. The opportunity for investing and savings alongside an insurance policy means it is a more complex product.
Inflexible. This type of life insurance is not as easy to cancel. You’ll likely have to pay a high fee if you decide to cancel your coverage.
With a whole life insurance policy, you won’t have much control over how the insurance company invests your cash value. The rate of return is usually less volatile than other investments but over the long term compare very well.
When is whole life insurance the best option?
What is the difference between term life insurance and whole life insurance?
Term life insurance
Whole life insurance
Why choose Shelter Bay Insurance?
At Shelter Bay, we know that buying life insurance is a big decision. Our team of insurance agents is dedicated to helping you find the best coverage for your life situation. We’re life insurance brokers, which means we don’t work for any specific company. That means when we offer you advice, you can trust that we’re not just trying to sell you a policy for our own gain.
We have built relationships with many different insurance companies and understand the various insurance products they offer. This means we have several options that could be right for you. All of our agents have their families, too, and we understand how much you want to protect and provide for your loved ones. When you’re ready to buy a life insurance policy, let the team at Shelter Bay help you find the best coverage.