Things to Consider When Buying Life Insurance

When you’re looking to purchase life insurance, you’re making an important investment.  Life insurance will protect your loved ones, but it can also be useful before it’s needed for this.  You’ll want to consider all the aspects and do your research before making a decision to be sure your chosen policy functions in all the ways you may need it.

Length of Coverage

Life insurance typically is available in two forms, term life, which lasts a certain period of time, or lifetime, including whole and universal life.  If you only want to be covered for a set period of time, such as when children are young or to cover the length of your mortgage, consider term life.  If you’re looking for life insurance that will cover you for the entire duration of your life and will accommodate expenses such as burial and income replacement for your spouse, then consider whole or universal life.

How much life insurance do you need?

When calculating how much life insurance you need, consider a few factors.  First, itemize your debt and what it would cost to pay off things like your mortgage, private student loans, car loans and credit cards.  Second, consider income replacement for your surviving spouse and dependents. You’ll want to remember to include day-to-day living costs, such as childcare, and remember that inflation will likely cause costs to increase. This can also include future education expenses for your dependents.  Finally, remember to include final expenses such as burial costs. 

Other Objectives

In some cases, permanent life insurance can be used as savings.  Life insurance policies that are lifelong have a cash value that’s meant to increase over time.  These policies contain a death benefit, also called a face amount, which is the amount that will be paid at the time of death, and a cash value, which grows over time on a tax-deferred basis like a retirement or tuition savings plan.  Often, you can pull from your cash value at any time and for any reason, such as additional income for your retirement or making a down payment on a home.

Beneficiaries

When you name a life insurance beneficiary, you are selecting the person or entity who will receive the proceeds of your life insurance policy.  As a general rule, you’ll want to avoid naming a minor child, who may not be able to receive funds, or your estate, which could have tax implications.  If you choose to have the policy benefit your business, be sure to have a formal plan in place for how the proceeds should be used.  If you’d like more information about how to select a beneficiary for your specific circumstances, be sure to speak with your independent agent.

Talk with an Advisor

After you’ve researched and considered your options, it’s best to get some individualized advice from someone with your best interests in mind who can guide you through the process.  Talk to your local Michiana Insurance agent today at (219) 369-6316 to get all of your questions answered and to find the best options for you and your family.