Life Insurance Guide

Necessity for the Life Insurance Guide: Life Insurance is far from simple, and in order to get the best policy for you that will provide for your loved ones you need to have all the facts. The last thing you want is to think you are getting life insurance to protect your loved ones, only to have them suffering later because you did not get adequate coverage. To make the life insurance buying process easier, here is a guide with some of the most important keys to life insurance.

How Much Life Insurance You Need: Many insurance brokers will try to convince you that you should have at least four times your annual income in Life Insurance to support your family when you are gone. For most people, however, this creates an impossible premium, because the more life insurance you have the more you have to pay each month for the policy. How much life insurance you need is really based on several factors. First, you should consider at least one if not two years worth of annual income to support your family while other income arrangements are being made. You should also make sure that your insurance policy will cover all funeral costs, as well as any debts that may be left behind. Finally, if your family does not have an emergency fund, additional amounts may need to be added to your life insurance policy to ensure that unexpected expenses such as car and home repairs can be covered easily by the remaining spouse. Education expenses for children may also need to be considered.

What Type of Policy Do You Need: If both you and your spouse work full time, as is the case in most households today, you probably do not need the added expense of a whole life insurance policy. The biggest difference between term policies and whole life is that you gain cash value on whole life policies. Term life policies are perfect for parents who just want to make sure that their children are well provided for in case of their death. These policies can be taken out in twenty year terms, ensuring that the children are full grown before the policy is terminated.

Borrowing Against Whole Life Policies: The biggest difference between term life and whole life, besides the fact of how long the policy is good for, is that your whole life insurance policy will gain cash value over time. This is very desirable for some who feel that life insurance is an investment in their life not just their family’s future.

However, borrowing against a Life Insurance policy is not always wise. First, it lowers the value of the policy. Secondly, when you borrow against a whole life insurance policy you have to pay a low interest rate on the money borrowed. Basically, you are paying interest on money you already paid to the Life Insurance Companies. If the amount borrowed plus interest goes over the amount you paid for the policy, the policy is terminated. The best way to remove the temptation to use this cash source and keep Life Insurance policies for their intended use is to stick with term life insurance policies that do not incur cash value and cannot be used in any way other than intended.

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