Amelia just hit a fastball. It's heading for the fences.
The opposing outfielder is running toward the warning track and stops running right before the fence. Your daughter just hit the game-winning home run.
As Amelia sprints around the bases, heading toward home plate, you hug your significant other, cheering for your son's team.
Heading toward the car, Amelia runs up toward you. "Of course honey we're going for pizza and ice cream. You just had the game of your life!"
While loading the car with baseball bats and an excited team of young ladies, you notice your significant other is nowhere to be found. That's when you notice a small circle forming.
Your significant other is on the ground, from an apparent heart attack. Someone has already called emergency services, and help is on the way.
As you arrive at the hospital, you find out your significant other didn't make it. Before you know it, you're making funeral arrangements and hugging other loved ones.
The loss of a loved one is not the only pain to come. You were a dual-income family, and the bills are piling up.
How are you supposed to work and pay all of your bills when your significant other's income accounted for 80 percent of your combined income?
This is when a small monthly payment to a 30-year term life insurance plan would help ease the financial burden.
What is a term?
This next part will define, in detail, some common vocabulary used when talking about life insurance.
Term
For a term life insurance policy, this is the amount of time you are covered for. If you purchase a policy to last for 30 years, it covers you for 30 years from the start of your policy.
Premium
The monthly or yearly payment you make to the insurance company for your specific life insurance policy.
Death Benefit
This may seem obvious, but it's best to explain. It's the amount of money the beneficiary receives in the case of the death of the policyholder.
Beneficiary
This is a person you name on your life insurance policy that receives the money for if/when you pass away.
Rider
These are add-ons you can apply to your insurance policy that allow you to take money out of it or other options such as long-term care.
Different Types of Life Insurance
While there are many types of life insurance policies to choose from, I'm going to talk about the two main types. While both have their pros and cons, life insurance is still worth getting.
Permanent Life Insurance
Permanent Life Insurance is life insurance that does not expire and combines a death benefit with a savings portion. This savings portion can build a cash value against which the policy owner can borrow the money to help meet future goals.
Term Life Insurance
Term Life Insurance is life insurance that provides basic protection against your death. This life insurance is the most affordable, and you set the amount of time you want it for.
Pros and Cons
Both types of life insurance have their pros and cons. Here is a list of the differences between Permanent Life Insurance and Term Life Insurance.
Permanent Life Insurance Pros
1. When a death benefit is paid to the beneficiary, it is distributed as tax-free.
2. Returns on your policy are comparative to that of a savings account or cash deposits.
3. You can contribute more money to your policy than you can to some personal IRA's or 401k's.
4. Can be used as collateral for other funding.
5. You have a guaranteed loan option. This means you borrow against the death benefit unencumbered compared to that of a bank loan.
6. All of the money your Permanent Life Insurance policy makes is tax-deferred. This is similar to the interest you make on a savings account.
7. The National Association of Insurance Commissioners (NAIC) has instituted non-forfeiture options as a part of a permanent life insurance contract. This means that the policyholder doesn't have to forfeit their cash build up if the policy were to lapse.
8. Funds are easily accessible, which allows you to withdraw them in case of an emergency.
Permanent Life Insurance Cons
1. Higher premiums than Term Life Insurance
Term Life Insurance Pros
1. The most affordable life insurance option.
2. Peace of mind you won't leave your family in financial ruin.
3. You can customize the length of the term.
4. The earlier you start, the cheaper the rate you lock in for the length of the policy term.
Term Life Insurance Cons
1. If the policyholder dies outside of the term, the beneficiary gets nothing.
How is my premium determined?
Let's say you were looking into a 30-year term life insurance policy, and you are wondering how much it will cost? There is a list of factors that come into play when determining your premium amount.
These factors are, but not limited to, age, gender, height, weight, lifestyle, and level of coverage. It also helps to not smoke if you want a lower premium.
The insurance companies put all these factors into a calculator, and outcomes your premium. If you want lowers premiums, do your best to stay in shape and not smoke.
What's the best option?
It all depends on what you want to spend, how many dependents you have, and how little of a mess you want to leave behind. The best option for this is at least a 30-year term life insurance policy.
A 30-year term life insurance policy can guarantee, in the event of a tragic accident, that the bare minimum is covered for your loved ones.
30-year term life insurance
Whether you are 25 and living with your parents while you look for a job, or 65 and not sure what the future brings, life insurance is for you.
Life insurance can be tricky. From policy questions to pricing, searching the internet can only turn up so many results.
If you have any questions, you should ask the professionals. I recommend the individuals at Insurdinary to assist with your life insurance needs.
