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I think that life insurance carries a negative stigma, and most people avoid discussing it if possible. I can remember my family discussing it when I was a child, and I know it freaked me out. Nobody wants to face their own mortality, or that of loved one. You will often hear that you “have to have life insurance” no matter what. This may, or may not be the case for you. Whether or not you have life insurance, the amount of your coverage, and the details of the policy, depend on your individual situation.
Ask yourself, do you even need life insurance coverage? If you are single, and without any dependants then you are probably better off saving your money instead of paying those monthly premiums. However, if you are married, have children, or other family members that depends on you, then life insurance is an absolute necessity. I have always carried a policy above and beyond my standard work policy for the sake of my parents. They are in no way dependant on me right now, but I am an only child, so it gave me a peace of mind to know they would have additional funds if anything happened to me in the future. I’m also getting married next year, so it’s time to review my policy yet again. It’s vital to review your current policy whenever you have a major life change.
Once you’ve decided whether or not to take out life insurance on yourself, you must then determine the type of policy. At a very basic level you have two choices; term insurance, or permanent insurance. Term insurance means just that, it’s applicable for a period of time. A starter policy may limit you to a one year term in the beginning, or you could sign a policy in excess of 10 years. It really depends on the premium pricing, and the company you work with. Permanent life insurance is a type of policy that will cover you for the remainder of your life. This type of insurance does not expire, however it has many of it’s own drawbacks.
Term life insurance is typically the most common and affordable policy to hold. This type of insurance only has death benefits. As you age the premiums will increase. Your coverage lasts only as long as the policy term. For instance, if you have a 10 year policy, consistently pay your monthly premium on time, and you die exactly 1 month after the policy expires, then you and your beneficiaries receive nothing from this plan. In other words, once this plan expires, you then need to seek out and purchase a new life insurance policy. Essentially it you don’t die (which I think most of us are hoping we don’t) in the time period, then all of that money spent over that 10 year period is a sunk cost.
Permanent life insurance policies cover you for..well…life! Many individuals use these types of policies as an investment vehicle. Even if you don’t die within a specified period of time, you can still recoup some and possibly all of the money you have invested in your life insurance. The specifics really vary by plan and policy requirements. While this type of policy has a steady monthly/annual premium, they are much more expensive than that of term insurance.
The type of insurance you choose is unique and dependant on your specific situation. You will need to analyze the amount of dependants you have, the number of years you plan on keeping the policy, your age, current health, and your adversity to risk. In the end, you should consult a trusted expert on life insurance prior to making any decisions.
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When we got married we took out two policies, both term. Our hope is to over the next 20 years or so build up enough equity and assets that we don’t need it anymore. I am not sure if we will do this but that is the plan.
When we start a family we will increase the amounts in our term policies to be safe.
As the main source of income, life insurance on me is essential for the rest of my family. I also hope to not need it someday, but while the kids are still living at home, I need it.
I think many people either don’t consider life insurance at all (just because it doesn’t cross their minds) or assume that they “have” to have it, without stopping to consider whether or not they really need it. (Not much reason for a single person with no dependents to get it, unless they think there’s some reason they might not qualify in the future.)