Unlike other assets, life insurance directly provides financial security to your loved ones the moment your capacity to generate income ceases either by death or disability. Life insurance does more than providing the common death and/or hospitalization benefits. It actually becomes a reliable source of liquidity for your family for whatever needs they may have – education, business, retirement or emergencies.
How Much Do You Need?
The best way to know how much coverage your family needs is to multiply your yearly income at least five times. The greater financial needs your family has, the bigger the coverage you need.
Types of Life Insurance
There are generally two types of life insurance – term life and whole life. Term life is cheaper but has a specific active period. If you die while the policy is active, your beneficiaries get the financial support, but if you do not die and the policy expires, you and your family get nothing.
Whole life insurance nowadays is the more preferred because although it has a higher premium, it offers your flexible options for withdrawal so long as the policy matures. A portion of the funds in a whole life insurance goes to tax-deferred savings, which you can cash out when you are older or retired.
Disability insurance, usually integrated in most life insurance policies, offers greater flexibility. This provides you and your family with financial coverage when you become unable to work. The premium usually depends on how risky your job and lifestyle are.
Apparently, the more flexible the policy is and the higher coverage it provides, the better.
How Reliable Are Your Agent and Insurer?
Do not just look into the figures provided in the sample computation sheet; make sure that the agent and the insurer have solid record. Some agents work independently and carry various policies from various companies, while others work as employees solely representing a single insurer. Only transact with duly licensed and trained agents working for a solid company.
A reliable insurance company is one with excellent history of payouts. Steer clear from a firm that does not pay claims well on a timely basis. Life insurance is meant to lift the financial burden off your family’s shoulders when you are gone, transacting with a bad insurer is adding insult to injury.