Understand Your Life Insurance Needs

Let's start with the basics. What is life insurance? Life insurance is a contract with an insurance agency where you (as the insurer) pay a premium, and in exchange, a benefit is paid out to your beneficiaries when you die. Life insurance can be beneficial if you have folks dependent on your income. For instance, if your death would mean your partner wouldn't be able to pay the mortgage on their own. There are two main types of life insurance, term and permanent. 

Term life insurance is where you pick the term duration (ex: 10, 20, 30 years) and if you pass away during that timeframe your beneficiar(ies) get a set amount of coverage. You pick the amount of coverage and pay a monthly premium in accordance with that coverage. After that timeframe passes you no longer pay your monthly premiums and you no longer have life insurance.  The insurance and related payout is only tied to the timeframe selected. 

Term life insurance makes the most financial sense for the vast majority of people. 

Permanent Life insurance is where you pay into it and once you pay a certain (high) threshold you get the insurance until you pass away. It has a guaranteed death benefit regardless of when you die; permanent lifeinsurance is forever. These policies are expensive and tend to be cost prohibitive because the premiums in relation to the coverage you get is very high. In addition, insurance brokers may be incentivized to sell permanent life insurance because they are tied to a higher commission for them, not because they are a good option for you as the consumer. In some cases permanent life insurance plans can make sense; for instance, if you have a child with special needs who requires costly care throughout adulthood. 

Do you have life insurance and if so, what kind? Let me know!