Let’s face it, most of us have more important things on our mind than life insurance. And with all the other costs involved in raising a family it often gets overlooked.
However, if you are parent with any dependent children you need to know these 5 things about life insurance.
I promise I’ll to try and make them interesting, plus as an added bonus at the end of the article, I have a simple and free way for you to save money.
1. It Needs To Replace Lost Income
The loss of any loved one is an extremely tragic and emotionally draining experience. On top of the emotional costs, there are often serious financial implications. The primary reason all parents need to have some form of life insurance, is to minimize these implications by replacing their lost income.
Depending on the age of your child(ren), you will need a policy that is the equivalent to at least 10-20 years worth of your current salary. Even if you are homemaker, you should still consider having at least some life insurance protection, because the work you do in the home is valuable.
This should serve to protect your family from unnecessary financial strain during an already difficult emotional time.
2. Children’s Life Insurance Is (almost always) A Bad Deal
If you are a new parent or a parent to be, you will be inundated with offers of life insurance for your children. On the whole, these are not the great deals they claim to be. They are sold based on emotions and rarely if ever make financial sense.
The reason is (in rather crude terms) children are a financial liability and not an asset. Therefore, in the extremely unlikely, but tragic situation that you lost your child, you would not be financially hurt in the same way as your children would be if something happened to you.
Moreover, don’t fall for lines such as the plan has a future cash value or that your children will be able to get guaranteed insurance in the future. Again, they are playing on emotional points.
Unless, your child has a chronic condition (about the only case it might make sense to buy one of these plans) it is extremely unlikely that they would not be able to get insurance in the future.
Moreover, the future value of these plans are almost never enough for what would be required. Instead, invest the money you would have paid into them, towards something like your child’s education.
3. The Younger and Healthier You Are The Better
If you are still relatively young and healthy you should definitely think about getting life insurance sooner rather than later. The simple reason is that younger and healthier people pay less than others, and these savings can last as long as long as your policy does.
On the other hand, if you are not in the best shape of your life there are still somethings you can do to lower your costs. Before you do any medical exam, avoid high fat or sugary food, smoking, alcohol and coffee. Also, avoid any strenuous exercise immediately before the exam as this will raise your blood pressure.
These should at least help to reduce your costs in the short-term. In the long run though if you are not in great shape you should consider improving it. This will not only help you but help your kids. They will learn a healthier lifestyle and you will be around longer to enjoy them.
4. The Difference Between Term and Whole Life Insurance
This is probably the most confusing thing for new and old life insurance buyers alike. Basically, term life insurance policies offer death benefits for a predetermined period of time.
For example, $1,000,000 worth of coverage for 20 years. Term life plans plans have no extra cash value beyond the death benfit coverage, so you are free to stop paying and switch companies if you wish. (Some restrictions usually apply)
Whole life insurance on the other hand, offers death benefits and cash value. You still pay your premiums every month but you are locked in for a longer period of time at a generally higher rate.
However, if you (hopefully) live beyond the original policy length you get some of the money you paid in back. But, if you decide to switch companies before your policy is finished you will incur some sort of financial penalty.
Thus to put it very simply, term life insurance offers lower rates and more flexibility. Whereas, whole life insurance offers cash value, which can come in handy later on.
Overall, if you are a good saver then term life insurance usually makes the most sense, but if you are bad at saving then whole life makes the most.
Before making any decision though you need to compare plans and rates to see what options are available and right for you.
5. You Need To Compare Plans and Costs
So, now you know more about what to look for and avoid in a life insurance policy but you still need to compare plans and rates. The Internet makes this extremely easy through the use free life insurance quotes. However, I have made it even easier than that.
Just select your state from the form below and you can find companies in your state offering free no obligation life insurance quotes. Then just pick one of more of the companies to compare plans, get quotes and find out more about your life insurance options.