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Life Insurance Basics

In these uncertain times, your family needs peace of mind. YOU need peace of mind in case the unexpected happens and you bite the dust. Life insurance is for your family. This blog is for the average individual like myself. If you are a multimillionaire, then you are browsing the wrong website. 

First, get a trusted insurance broker.  They will help you navigate the different policies that most fit you and help you choose companies providing them. 

 

Second, know the different policies available.  There are different policies ranging from the very complex to very simple, depending on the assets/expenses.

These are the different types of life Insurance:

  1. Term life insurance

  2. Whole life insurance

  3. Permanent life insurance

  4. Universal life insurance

  5. Variable life insurance

  6. Variable universal life insurance

  7. Simplified issue life insurance

  8. Guaranteed issue life insurance

We will focus on just the two most common: Term and Whole life insurance.  These are the differences.

TERM life insurance is cheap, affordable and makes the most sense. 

This is the policy where you set a time frame of how long you will keep the life insurance. For example, if you choose 65 years of age, once you turn 65, the policy is void unless you renew it. This is to cover expenses/income in case you die. This can help pay off the house/car/credit card debts you left behind in case you die before age 65. If your kids/wife are still financially dependent on you after 65, then you might want to extend it.

WHOLE life insurance is usually 5-10x more expensive than term. This covers you for your entire life. This type of policy accrues cash value or dividends over time. 

Third, understand the cost of the life insurance.  This is dependent on your age, health, income, and the length of the term.

Fourth, choose a company with the guide of your insurance broker.  Choosing a company could be challenging but you may choose based on their ratings. I would personally choose a company with the better rating.

If you have dependents, having life insurance is a must. I feel term life insurance makes the most sense. Other policies tend to get complicated, be wary of attractive offers promising endless supply of cash. 

Till next time.

JL

Disclaimer: This blog is meant purely for educational discussion of finance. It contains only general information about financial matters. It is not a financial advice and should not be treated as such.