Choosing a Life Insurance Plan

by Nancy

Life insurance is potentially the most important form of insurance for a person to have. Life insurance ensures that your family will have financial security in the unthinkable event that you lose your life unexpectedly.

Unfortunately, there is a cloud of confusion and misinformation that surrounds life insurance and the process of buying or obtaining a life insurance policy.  This, combined with a popular culture image that portrays life insurance policies in a negative light has led to a lack of solid information on life insurance.  Getting life insurance is important and you need to be fully informed so you can make the smart choice for your family.

Important Facts About Life Insurance

If you have dependents life insurance is a must.  Dependents are anyone that relies on you financially, most often children, but also including a spouse, parents or grandparents, family or friends with disabilities or illness that precludes them from working, siblings, or even an employee or business partner.  If you have someone who is financially dependent on you, you need life insurance.

Life Insurance

The popular view of life insurance is that it gives a monetary value to someone’s life that can be collected in the event of their death.  However, life insurance is much more nuanced than a simple monetary value.  Life insurance is meant to help those who remain to cope financially with the loss.  Life insurance can be used to cover funeral and legal expenses or help pay off any debt that remains.  More importantly, life insurance can be used to cover the loss of income that may accompany the death of a loved one.  The last thing any family wants to deal with is tedious finances while they grieve the loss of a loved one.  Life insurance helps ease the financial burden of a family death helping the family stay stable and safe as they work through a difficult time.

Policy Options

There are two main forms of life insurance policies- term and permanent.

  • Term life insurance is the simpler and less expensive of the two.  The policy premium is based on the probability that the insured will die in a specified term.  This term can vary, although the majority of term life insurance policies cover ten to thirty years.  The premiums of a term life insurance policy are typically guaranteed for the duration of the term, but may be prone to changing after the term ends, at which point you need to decide whether or not to maintain the policy or let it expire.
  • Permanent life insurance policies, on the other hand, are more expensive by a large degree, however, they are designed to last perpetually.  Permanent policies also include a savings or investment aspect which is meant to help you maintain the policy.  Permanent policies are not usually the right choice, especially if you are looking for individual life insurance, but they should not be discounted.  Make sure to discuss the specifics with your insurer if you choose to pursue a permanent life insurance policy.

Nobody likes to think about, let alone talk about, their own death or the death of a family member, but finding the right life insurance policy is of the utmost importance to ensure that your family is looked after in the event of your death.  Getting the right policy is an important way to make sure you can care for those important to you even if you are gone.