When it comes to buying life insurance, people tend to put it off for two reasons: they fear that by getting life insurance, they might jinx themselves and pass away sooner or that choosing and buying a life insurance policy is complicated. Fortunately, neither is true.
Having a life insurance policy in place will give you peace of mind because you’ll know that there’s a financial safety net in place for your loved ones. Finding the right life insurance policy for you is incredibly simple with Insurify, your one-stop-shop for getting multiple quotes, comparing them, and applying online for a life insurance policy that covers your needs.
Decide What Life Insurance Is Best for You
The first decision you need to make is whether you want a short-term policy or a long-term policy. Both types of financial products have distinct benefits, but only you will be able to determine which is best for you based on your current life situation and your plans for the future. Here’s how the two types of life insurance stack up:
Term Life Insurance: The Best Choice for Most People
Term life insurance is short-term, and policy terms last for 10, 15, 20, 25, or 30 years. Term life will give you the most bang for your buck. There are no frills with these policies, so premiums are inexpensive. As with other types of insurance, you don’t receive any financial benefit when it expires.
The death benefit will only be paid out to your beneficiaries when you pass away. Term life is not an investment. Its purpose is to be in place for a period of time when you need it most, typically when you have children to raise or debt that needs to be paid off with your income. You get life insurance so that your family has financial support when you’re gone.
Let’s say you’re 25 years old and married with $50,000 in business debt. Your plan is to have that paid off within 10 years, but if you pass away before then, your partner (or a cosigner, such as a parent) might be on the hook for paying the debt. Having a term life insurance policy above what you owe ensures that your spouse can quickly pay the debt.
After the 10 years pass and you’re out of debt, you have little need for life insurance, as long as you and your spouse are each able to live on your own salaries should one of you pass away. You can let the insurance expire, or if you’ve added to your family, you can get a new policy.
Most people will find that the younger and healthier they are, the cheaper term policies are. If you’re in excellent health at age 22 with no dependents but plan to pursue having a family within the next decade, it’s a good idea to get coverage in place now with a 30-year policy.
A term life insurance policy allows you to have an extra layer of financial protection, at a reasonable price, for when you need it most. Insurify helps you find the best prices on term life policies with just a few clicks.
Permanent Life Insurance: Good for People Who Have Lifelong Dependents
A permanent life insurance policy is just as it sounds: a permanent policy covering you until you cancel it or your beneficiaries file a claim after you pass away. Because there is a much higher chance of insurance companies paying out a claim, permanent life insurance is much more expensive than term life insurance.
There are two main types of permanent life insurance: whole life and universal life. Once you have a policy, both will stay in place for the rest of your life.
Whole life insurance is often called cash value life insurance because the policy builds money like a savings account. Let’s say you pay into it for 15 years but decide to cancel it and switch to a term life insurance policy. You can contact your insurer to find out the cash value. That’s the payout you will receive when you cancel your policy.
Universal life insurance offers an investment component as part of the policy. Rather than build up cash value like money in a savings account, the money that accrues is invested. These policies are complex and not for the average person who simply wants financial protection for their loved ones.
With permanent life insurance having higher premiums than term life insurance, why does anyone buy it? There are a few financial situations that might make it a better choice. People either need insurance beyond the scope of a term policy or have sophisticated estate plans in which permanent insurance plays an important role.
You will benefit from permanent coverage if you cannot get a term policy due to medical history, such as high blood pressure, which may lead to more serious issues or are at risk for developing a serious health condition. Some policies are guaranteed issue and will cover you without a medical exam and paperwork.
A whole life insurance policy is also useful if you have a lifelong dependent, like an adult child with disabilities. If there are no other funds for their care after you’re gone, a whole life policy is an invaluable part of your estate planning.
Tip: When switching from one life insurance policy to another, never cancel the old policy until you have confirmation that the new one is in effect. Shopping for a new, cheaper term life insurance policy is easy with Insurify.
Determine How Much Term Life Insurance You Need
There’s no one-size-fits-all number for how much life insurance you should carry, but there are some helpful guidelines that you can use. These will help you determine the right amount of coverage based on your income and your family situation. Once you know how much you need, you can get the lowest price by shopping among hundreds of life insurance providers at Insurify.
The Basic Rule of Thumb
You buy life insurance as a way to replace your income so your dependents don’t need to worry about money after you pass away. The amount should be 10 to 12 times your annual income so that they have plenty of money for your final expenses and can then live on the remainder.
Ideally, when the beneficiary receives the death benefit as a lump sum, they will work with their financial planner to invest it. As the money continually grows, your family can withdraw what they need each year to provide for their financial needs while maintaining financial security for years to come.
In addition to covering a multiple of your annual income, you should add an amount equal to any debt. This includes private, cosigned, or consolidated student loans, credit card debt, auto loans, business debt, and mortgages. When you pass away, your estate—the money you leave behind—is obligated to pay back your creditors.
Imagine that you make $75,000 per year and have student loans, a car loan, and a mortgage totaling $250,000. To cover your income, you should take out a minimum of a $750,000 policy and add to it another $250,000 to pay off the debt. In this situation, a life insurance policy of $1,000,000 to $1,150,000 is an ideal amount.
Special Considerations for Singles Without Dependants
As a single person with no dependents, you have little need for life insurance since no one relies on your income. But you do need to think about your final expenses and any debt that you have a cosigner for.
Even though some debts may be forgiven upon death, any debt that you have a cosigner for will be sent to that person to pay. A life insurance policy will ensure they can pay it off if you pass away. You also might want a small policy to cover final expenses, which cost around $9,000. This will prevent your family from having the financial strain of footing the bill.
However, if a partner, kids, or both are possible down the road, it may be more cost-effective to get a term policy, with level premiums, started now. You can lock in your rate for the life of your policy. Starting a 30-year term policy when you’re 22 will be far less expensive than waiting another decade.
Special Considerations for Couples Without Dependents
Couples with no dependents may not need much or any life insurance. Typically, a small amount for final expenses plus an amount equal to your total debt is sufficient. This will allow your partner to pay off the debt and have money to live on after you pass away.
You may decide that you don’t need life insurance at all if you are debt-free or if you can live on your income comfortably. The exception is if one of you doesn’t have an income. Then, the working partner should have at least 10 times their income in coverage.
In many cases, even though one partner doesn’t have income, they are doing things that contribute to your overall financial well-being. This includes cooking meals at home and doing the housekeeping.
For couples who plan a family in the future, buying a term life insurance policy sooner rather than later is a good idea. To ensure your child and partner are protected as much as possible, do not delay getting a policy once you know you will be parents.
Special Considerations for Singles With Dependents
Life insurance is essential for you if you have young children or an elderly parent whom you support. Term life insurance will be your best bet because it’s inexpensive and you can select the term length that’s right for your needs.
You need to factor in whether your child’s other parent supports them. If both you and their father have joint custody and split expenses 50/50, you can get by with less than a single mom who is on her own to provide for her kids. Additional considerations to determine how much life insurance you need are the number of kids and their ages, cost of living, and college expenses.
In a situation where the other parent does provide support, request that they get their own policy. To be entirely sure that your kids are taken care of if that parent passes away prematurely, take out the policy yourself. You will need their consent and cooperation, and you’ll make the premium payments, but it will give you a little more peace of mind as the beneficiary.
Special Considerations for Couples with Dependents
Whether both partners work or one is a stay-at-home parent, both of you need life insurance. Aim for getting a policy that falls within 10 to 12 times your salary. Then, adjust the amount depending on the number of children, their ages, and how much debt you have.
A couple with two young kids living in New York City will need larger policies than a couple who lives upstate in a lower cost of living area with three teenagers. Go with a more comprehensive policy if you’d like to leave money for the kids’ college expenses.
A stay-at-home parent needs about $500,000 in life insurance because of the economic value they provide. No matter what one parent’s salary is, new expenses pop up when the other parent passes away. Hiring a nanny, relying on take-out, and having a housecleaner will likely be new line items that weren’t needed before.
Use Insurify to Compare Life Insurance
Getting life insurance is easy once you determine the best type of policy for your needs. Now that you know how much life insurance you need, it’s almost effortless to get life insurance quotes. There’s no need to call up a life insurance agent to start the application process. Insurify lets you get quotes on life insurance coverage from multiple underwriters.
Just provide the necessary personal information, and within minutes, you’ll be able to compare insurance products from top insurance providers in the United States. With a few clicks, you can get details about the life insurance company, including their financial strength and the amount of coverage they offer.
After you choose the one that’s best for you, start your life insurance application online with Insurify. The underwriting process doesn’t take long, though you may be asked for additional information, including your Social Security number and medical records.
The Bottom Line: Sooner Is Better Than Later
With term life insurance being so easy to compare and inexpensive to buy, there’s no reason to put it off any longer. While no one ever hopes for their loved ones to make a claim on life insurance, they will appreciate that you took the time to put it in place so that they don’t suffer financially in your absence.