If you’re trying to decide whether or not you need life insurance, ask yourself one simple question: “If I die, would I leave anyone in a financial bind?” If you answer yes, then some type of life insurance probably makes sense for you.
Provide financial security for your family
If you’re married, have kids or are supporting elderly relatives, a life insurance policy helps ensure the financial support you provide now will continue after you die. Among other benefits, the right policy can:
- Replace your monthly income to help with daily living expenses.
- Cover medical bills.
- Pay off debts like a home mortgage, credit cards and other loans.
- Pay your funeral expenses.
- Help pay estate taxes and assist with other estate-related matters.
- Help with your kids’ college tuition.
- Provide assistance with family business continuation plans.
Another important benefit of life insurance is that the payments are made directly to your beneficiaries, rather than going through your estate. That means your loved ones could get the money they need faster – usually without any income tax liability.
How much insurance? And what kind?
A good rule of thumb is once you become a parent, you should have life-insurance coverage that will last at least until your youngest child completes college. The dollar amount you choose for your policy depends on a number of factors, such as how much income you want to replace, how much debt you have, whether or not you have a mortgage and your long-term financial goals for your family.
As far as what kind of policy you want, there are four basic types:
Term Life – Generally affordable death benefit protection for a specific period of time
Whole Life – Lifetime protection (as long as premiums are paid) that also builds cash value, which you may be able to borrow against and pay back the loan with interest. Any unpaid loan would be subtracted from the death benefit.
Universal Life – Life insurance protection with a combination of flexible premiumum payments and, if properly funded cash value buildup that you can borrow against.
Variable Life – Cash value life insurance in which you manage the cash value portion of the policy by selecting variable investment options offered by the policy. Your variable investment value will vary depending on the financial markets and the investment options selected. Account growth is not guaranteed; it’s possible to lose part or all of your investment
Life insurance policies can cover a single life or two lives through what is often called a “survivorship” policy.
There’s a lot more to life insurance than what is written here, of course, so a conversation with a financial professional you trust should be your first step.
Yes, you can afford it
If you’re relatively young and have a family, a term life policy can actually be quite affordable. If your budget will permit, a cash value life insurance policy can not only protect your family in the event of your death but also provide you with additional policy benefits, such as access to cash values for an emergency. If you wait until you’re older to get a policy, your premiums will probably be higher. But whatever kind of life insurance you choose, or however much you pay, the protection and peace of mind it can provide are things you can’t put a value on.
Products and services offered through the Voya® family of companies.