Life is unpredictable, but you and your loved ones can be prepared for the inevitable regardless of the how’s or why’s. Life insurance is increasingly important to protect the financial security of dependents, yet there are so many who have little or no coverage. Top three questions you need to ask to know about life insurance:
1) Why should I get coverage?
Life Insurance is not about protecting your life or well-being as most, if not all, other types of insurances are. It is a form of coverage protecting those closest to you from facing insurmountable debt caused by your final expenses or other financial hardships without your income.
2) What kind of coverage should I get?
Once you decide to take that first step toward getting a policy, you will need to decide what kind of policy fits your needs. There are many different types of life insurance policies offered to fit an individual needs and budgets. Each policy has different benefits and drawbacks, so it is important to carefully consider each one before purchasing a policy. While each policy can be tailored on an individual basis, the main categories are:
- Term life refers to a policy that does not have an investment or cash value component but offers a monthly premium guaranteeing coverage for a predetermined amount of time.
- Whole life is a permanent life insurance policy that builds cash value and may pay a dividend.
- Universal life is also a type of permanent coverage policy that pays a flexible interest rate, and the death benefit may or may not be guaranteed.
- Variable life is another type of permanent coverage where the cash value is allocated to one or more investments referred to as separate accounts making the cash value subject to the fluctuations of the broader markets.
3) How much in coverage should I get?
Another important component in determining the right life insurance policy is to calculate how much coverage you need. There are many factors to take into consideration when deciding on a policy amount, such as how much your family will need to maintain their current lifestyle without your income, as well as funeral costs and other final expenses. These may include medical bills or nursing home fees that will fall upon the family should you pass on prematurely.
To learn more about why life insurance is important for you and your loved ones, or to check out your coverage options, contact the New York State Bar Association Insurance Program at (800) 727-7770.