Why am I purchasing life insurance?
The idea that life insurance must be complicated is a misnomer that I want to dispel. It doesn’t have to be stressful, there are some basics you as a consumer should understand. But before we get into what type, how much and when you should get life insurance, you should be asking yourself this question:
Why am I purchasing life insurance?
Seems simple, yet the answer can easily direct you toward the right type of coverage. By providing the answer to your “why” it can keep you from overspending and even choosing the wrong coverage or committing to a policy that does not fit your needs.
There are hundreds of carriers and even more agents out there that can provide a valuable service of being your advocate, check out our recent blog on insurance agents v brokers. However, understanding the two main types of insurance is a good step before looking at getting insurance quotes.
Types of Insurance
Term life – this is time-bound insurance, meaning that eventually, the benefit will expire. This is usually for a term of 10-30 years, reserved for younger policyholders in their working years who want to leave a contingency plan due to loss of income, and is generally less expensive. If you outlive your policy your beneficiaries have no claim to the benefit, and this type of insurance does not build cash value.
Whole Life – this type of insurance does not have a term limit; the policy is with you if it’s active and premiums are being paid. This type of policy tends to have a higher premium but builds cash value over time and your death benefit is guaranteed. This is the most straightforward type of life insurance you can purchase. Many types of policies fall under the umbrella of whole life and may or may not require a health exam, or health questionnaire and may have tiered coverage based on age and health status.
Term and Whole life are the two most common types of insurance, so consider the question again “Why am I purchasing life insurance?” Does one type of insurance seem like the better answer? This is the first decision many people make when finalizing their policy and coverage.
Here are some common “whys” that we hear at Security National Life.
- I want to cover my funeral expenses for my family when I pass
- I would like to provide enough to cover any final debt I may have for my loved ones
- I would like to leave a small nest egg for my loved ones when I pass
Do these sound familiar? If yes, you may be looking for whole life coverage. Now that you have your first answer the path to choosing the right coverage is clearer. Ready to dive into the next steps, consider the following:
- How much does a funeral or cremation cost today?
- What do I want in a service and what burial options are out there for me
- What other expenses do I want to cover for my family?
- What can I afford monthly for the above questions?
All these questions are fundamental but not asking them and having a plan can set you of course. Start with the basics, take your time, and think about what is important knowing that you will be paying for this policy until your passing. By starting with the basics, you will be well informed and in all stages of your buying journey never forget that “why?”
