No one likes to think about the consequences of their death. Yet, if you have family members that depend on your earning power, the important question you must ask yourself is, "What will happen to them if I am no longer around to provide for them?" It is generally accepted that one of the best ways to be rest assured that your dependants will be taken care of if you die is to take out life insurance.
Life insurance is a long term commitment. The point of life insurance is to replace income that would be lost if the policyholder dies. As part of the agreement with an insurance company, your insurance policy will be a monetary value of what you will normally pay as monthly premiums, which, in turn, depend on your age, gender, occupation, medical history and other factors.
There are currently many types of insurance policies and it is up to you to decide which one is best suited for your needs. Term life, whole life, universal life, permanent life and employer life insurance are among the various types of life insurance you will need to investigate. However, two of them, namely term and permanent, need extra attention.
The premiums for term insurance are usually the lowest among the different types of life insurance, but will increase in cost with the age of the insured. Unlike other types of insurance, term life insurance has no cash value, savings or investment elements that procure administrative costs and require higher premiums. On the other hand, permanent insurance is sometimes bought as an investment. The premium for permanent life insurance is initially greater than that required for term insurance, however, the premium will not increase like term insurance will and cash value will accrue.
Other factors should spring to mind when considering life insurance. Often life insurance policies do not allocate much of your premium to begin building a significant cash value before you've paid into the policy for 10 years or more. Moreover, the rate at which your policy builds cash value is often below the rate you could get if you invested elsewhere. Therefore, it is often wise to consider buying a term life insurance policy and investing the excess of what the whole life insurance policy would cost. That way you would have the benefit of both life insurance and a higher rate of return on your investments.
Overall, you should evaluate your circumstances to determine if you need life insurance. If you need life insurance you should determine how much insurance is appropriate and the type of life insurance policy that would best meet your family's needs. Remember that like savings, investments, and homeownership, life insurance is an essential part of financial planning.
Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.
Orignal From: How to keep healthy in later life - what you need to know about life insurance.
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