Life Insurance  

What you need to know

• Who Who Needs Life Insurance?
• What What does Life Insurance Protect Against?
• Where Where Can I Find the Best Price on Life Insurance?
• When When Should I Purchase Life Insurance?

Life insurance policies are contracts that can provide a peace of mind to consumers, especially those with young children or other beneficiaries, by guaranteeing monetary aid to families or others after death. Life insurance can cover expenses including funeral costs, outstanding debt, child support payments, and unexpected financial burdens caused by a death.

Who Needs Life Insurance?

Experts have differing opinions on whether or not young people with no dependants need life insurance, but many agree that the catalyst to adults purchasing life insurance policies is having children. If you will owe debts or taxes after you die, or if people who depend on you financially will not be able to support themselves in the event of your death — especially if you do not have a significant savings account or other means of paying off debt — the National Association of Insurance Commissioners suggests that you should consider purchasing a life insurance policy.

What Does Life Insurance Protect Against?

Policies differ, but in general, life insurance provides a death benefit to named beneficiaries if a policy-holder dies, protecting them from ongoing financial woes caused by the death. Term life insurance policies, according to the National Association of Insurance Commissioners, strictly provide a death benefit of a certain amount, and your dependants would receive the face value of the policy. Permanent life insurance, also known as whole life, universal life, and variable universal life insurance, provides a death benefit and in some cases, a cash savings.
Life insurance policies can provide coverage for many financial burdens, such as a home mortgage, college savings, income replacement, and final expenses. Financial experts such as Dave Ramsey don’t always agree that purchasing a whole life insurance policy to cover those needs is a better investment than a savings account, stock, or other market investments, so keep that in mind when you’re deciding what to do to ensure the financial stability of your dependents.
Payouts on life insurance also differ. Benefits can be paid out all at once as a lump sum, or in installments for a given period of time, for life, or through a Retained Asset Account, which allows beneficiaries to weigh several options following a death before making a decision.

Where Can I Find the Best Price on Life Insurance?

Several factors will affect your life insurance rate, according to the National Association of Insurance Commissioners. The age at which you purchase a policy will significantly impact your premiums; the older you are, the higher your premiums will be. Your overall health, pre-existing and chronic conditions, and your health habits will also be considered; the healthier you are, the lower your payments will be. Your driving record, your participation in extreme hobbies such as skydiving, and your geographic location will also be considered.
The cost of your life insurance policy will also be determined by which of the two key types of policies you buy: term insurance or permanent insurance. Term insurance covers a policyholder for a specified period of time, or term. It pays a death benefit, according to the NAIC, only if you die during that term. It will typically offer the best protection for the price, but it may not be renewable after it expires or may cost a considerable amount to renew. Permanent life insurance, on the other hand, can provide long-term financial protection including a death benefit and, possibly, cash savings. Premiums will be higher for permanent life policies, which are also known as cash value, universal life, variable universal life, and whole life policies.
Depending on the type of coverage plan you purchase and the age at which you purchase it, life insurance policies can range from a few hundred dollars a year to a few thousand dollars a year. Because there are so many factors on which cost is based, shopping around online can generally give you a good idea of what you can expect to pay for a policy that will meet your needs. Remember, though, that a lower price does not necessarily mean the best policy; keep your long-term and short-term needs and goals in mind. A good place to begin your search for the best life insurance policy for you is to check with the major life insurance agencies, including All State, Geico, Nationwide, Progressive, and State Farm, and compare their policies and rates. If you have an agent or company from whom you have purchased other insurance policies, such as auto or home, consider using the same company for your life insurance policy. In some cases, discounts may be offered for purchasing multiple policies from the same company.
According to the National Association of Insurance Commissioners, discounts can also be offered for improving your health because that way, you will be seen as less of a risk to providers. Check to see if you may be eligible for discounts after you make good health decisions, such as quitting smoking or lowering your cholesterol.
Before you make your final decision on the company and policy that you believe best suits your needs, make sure that what you are signing up for is legitimate. The NAIC recommends checking your insurance company’s credit rating via resources such as Standard & Poor’s, A.M. Best Co., or Moody’s Investor Services. Look for a company with a rating of A+++ or AAA. Use the NAIC’s Consumer Information Source to find information about a company’s financial ratings and consumer complaints, as supplied by state governments. If you don’t feel comfortable with some of the complaints made against a company you are considering, you may want to consider going with a different company.

When Should I Purchase Life Insurance?

There’s no set age or time of life that people should start getting life insurance, but according to the National Association of Insurance Commissioners, many people choose to get a life insurance policy when they start having children. Life insurance policies protect your family members or other beneficiaries from financial burdens that might be caused by your death, so if you are concerned about leaving behind a hefty sum of unpaid bills, investing in a life insurance policy could provide you and your loved ones with comfort in knowing that they will be taken care of. Some companies provide life insurance policies to employees as part of their incentive packages, and if so, there is no reason not to get a policy at any age, though you may want to increase the amount of your policy or purchase additional coverage.
Purchasing a policy later in life can make premiums more expensive, especially if issues such as poor or disintegrating health become factors. It is also important to note that term life policies, or those who provide benefits only if the policy-holder dies in the covered time period, increase in price with age. Term life insurance policies are typically cheaper than permanent policies for younger buyers. If younger people are finding the cost of permanent life insurance to be too high, it may be a prudent financial decision to purchase a term life policy that can be converted to a permanent life policy for a fee when they are financially ready to take on the additional monthly payment.
When you decide that now is the best time to purchase life insurance, CNN Money suggests purchasing a policy that will meet your needs based on where you are in life. For example, if you have a three-year-old child, it makes sense to purchase a policy that will last at least 15 years, or for as long as it would take them to be financially independent. If you’d like to contribute to their college fund, consider purchasing a policy that lasts longer. Similarly, if your retirement benefits take effect in five years, it might not make sense to invest in a policy that covers you for 10 years — but check the details of your specific policies to be sure.