As we get older, we tend to start thinking more about what we want to leave behind when we go. Sometimes this might be in terms of legacy, or remembrance. But more often than not, we just want to be sure that we’ve left a healthy and stable life in front of our loved ones.
Do you know what to know about life insurance?
Life insurance is the easiest way to do this and is one of the most important financial considerations any household can make. A life insurance policy can protect your family’s future financial needs and can provide peace-of-mind while you live out your golden years. It’s a shame that there aren’t more Americans who are prepared.
It’s true that the subject can be complicated, but it is essential for every family to understand. Read on, and we’ll walk you through the essentials on life insurance policies.
1. Life Insurance Isn’t Just For The Old
Too often, people don’t think about life insurance until late into their lives. Only once the idea of mortality really rears its head do many think about the financial future of their loved ones, and a world without them in it.
You don’t have to be so deep into your life to think about life insurance. In fact, it’s often better if you start looking into such policies early in life.
The older you get, the more life insurance is going to cost you. If you develop any sort of medical difficulties, your premiums and payments are going to rise (more on that later). So there are actually a number of big benefits when it comes to taking out a life insurance policy early.
You can lock in a very low rate at a younger age, and stick with this rate no matter what happens later on. While this does mean you’ll be paying premiums over a longer range of time, you can still save big if done properly.
Even if you don’t take out a policy right away, it’s not a bad idea to get very familiar with life insurance early on in life. That way you’re prepared when the time comes to take a policy out.
2. Two Main Types Of Life Insurance
When it comes to life insurance, there are two main types you’re likely to come across. They are term insurance and permanent insurance, and they have some key differences as compared to one another.
Term life insurance is generally the more affordable option. It is an insurance policy that is taken out for a certain period (or ‘term’) of time. This could be five years, ten years, twenty years, and so on. The policy is active for this period and then expires once these years have gone by.
If a person dies within the given term, then the policy is paid out in full. However, if they survive through the term and pass away after the policy’s completion, there will be no payout. This is why these types of policies are generally more affordable: there’s a decent chance someone will have to renegotiate their policy later on.
In contrast, a permanent life insurance policy does just what its name indicates. It’s a policy that lasts all the way up until a person’s death: and it doesn’t matter if they pass away tomorrow or forty years from now.
There’s a lot of benefits to this kind of insurance, peace of mind being a major one. Permanent insurance allows for more solid financial planning because you’ll always know the size of payments you’ll be expected to make. And you will never have to worry about your family’s future following your death: the payout will always be there.
That being said, these benefits are why permanent life insurance is often more expensive than term. A person will need to weigh the pros and cons of these policies before settling on which one is right for them. If you have more questions about types of policies, you can read more now about common questions.
3. Determining The Premium Rate
Premiums are the monthly payments you make to the insurance company in return for your policy. These premiums will depend on the type of policy you take out, but they are also reliant on a number of other factors.
Essentially, premiums are determined based on the likelihood that someone will pass away. Current health and pre-existing conditions are thus weighed heavily by an insurance company when deciding on a premium amount. Family medical history can be key.
Gender is also considered, as females generally have a longer life expectancy than males.
A person’s location, marital status, and lifestyle play a big part in determining this kind of cost as well. Do they have risky hobbies, drink a lot, or smoke a lot of cigarettes? If so, you can expect to see higher premiums per month from the insurance company.
Different insurance companies might offer different rates to the same individual. This is why it can be key to shop around for life insurance and find the company that provides the best deal for you. The stability and financial safety of your family is well worth the effort it takes to find the proper policy.
What To Know About Life Insurance
Many people are curious about what to know about life insurance. Whether you’re getting old or just looking ahead down the line, it’s worth understanding how these policies work. It can save you a lot of trouble, stress, and worry later on.
Have more questions about family life? Check out our self-improvement page for more.