Buying life insurance is not an everyday task. There's a number of factors to be considered before you make the decision, including the type of insurance to buy. Because buying life insurance is an investment that benefits you and your family members, becoming educated is key.
Life insurance policies are extremely complex, and there's not a one-size-fits-all policy. Some policies will require that you submit to a medical exam, others don't require one. You'll need to provide some information regarding your medical history and overall health either way. Many policies use your health as a guideline in determining how much your monthly premiums will be.
Below, you will find some information regarding the different types of life insurance policies available and how they work. While this just an overview, this will give you some idea of what you need before you start on your quest for insurance.
Term or whole
The first question to be answered when buying a life insurance policy is whether to go for the low-cost term insurance policy or a universal life insurance. Term life is a good choice if you need coverage for only a few years. Whole life is a type of permanent insurance and is useful if you need coverage for the rest of your life.
Living benefits
Living benefits are policy riders or extras that allow you to access the death benefit money even when you are alive but only under certain conditions. These riders include:
- An accelerated death benefits rider that lets you access your payout if you are diagnosed as terminally ill. It might include a clause that requires a life expectancy of less than one year.
- A chronic illness rider that gives you the benefit even in the absence of the diagnosis of terminal illness. Eligibility, however, will depend on your inability to carry out "activities of daily living" such as eating, bathing and dressing.
Life insurance trust
The primary reason for buying insurance is to provide for children when you're not around. You should not name your child as a beneficiary. In that case, the company can tie up the money and disburse only when the child reaches the age of 18. If a trust is created, the children receive the money, no matter their age. You could also restrict the use so the money is not wasted or set the trust up to disburse certain amounts at regular age intervals.
No matter the type of insurance and what your needs are, it's helpful to do your homework before making the purchase. If you are still unsure of the type of insurance to purchase, it's best to reach out to a financial professional experienced with life insurance policies.
It may also be beneficial for you speak with an estate planning attorney. There are many options available for you aside from life insurance. Together, you and your attorney can work up a combination of life insurance and other estate planning and financial planning needs to determine your overall goal for ensuring your family is financially secure.