Eight Things You Should Know About Life Insurance
Life insurance is an important financial planning tool. It can provide for your family if something happens to you, or provide an income for you in your retirement years. It can also be a confusing subject for most people who are not financial planners. Here’s what you need to know about life insurance before you buy.
There Are Two Main Types of Life Insurance
Term policies are what most people think of as “life insurance,” polices that pay out a defined benefit if the insured person dies. Whole life insurance policies combine term insurance with some type of investment that builds cash value.
Buy Enough Term Life Insurance to Meet Your Needs
Most financial planners recommend that you buy enough coverage to replace five to 10 years of your salary.
Choose the right Term for Your Policy
Make sure that the insurance policy you choose will last as long as it takes for your kids and other dependents to leave the nest, or until you can start collecting your retirement income.
Buy Life Insurance When You’re Healthy
Term life insurance is always least expensive when you’re young and healthy. In addition, once a term life policy is in effect, you can often maintain it at with pre-determined increases in premiums, making it easier to plan. Buy life insurance as early as you can, especially if you have dependents.
Tell the Truth on Your Application
When you apply for life insurance, be scrupulously honest with your answers. Don’t try to fudge facts in the hope of getting a lower rate. The insurance company will investigate before paying out on a large claim, and if they find deception, it could invalidate your claim.
Whole Life Policies Accumulate Cash Value
There are many different types of whole life insurance policies, but they all have one thing in common:
part of your premium is put toward building cash value from investments made by the insurance company.
Whole Life Insurance Has Tax Benefits
The cash value is tax-deferred, and you can borrow against your policy without paying taxes on it. You only pay taxes on the income in your whole life policy when you cash it in, often at the lower rates that seniors pay.
Always Know What You’re Paying and What It Pays For
Insurance agents are highly motivated to sell whole life insurance policies, so they don’t always tell you about fees and commissions you may have to pay. Always read the entire life insurance policy carefully.
We offer many different kinds of life insurance for all types of situations. Talk to one of our agents to help you figure out exactly what kind of life insurance works best for your life.