Do I need life insurance? Do I have enough, and the right kind?
If you have loved ones who rely on you financially, life insurance is a way that you can protect their future. Having the right policy for your stage of life can give your family more peace of mind, and less of a financial burden, in the event of your death—and it may also deliver financial benefits while you’re alive.
Most importantly, choosing the right life insurance policy can help ensure that your family will have the same financial security and quality of life even if you’re not there to provide for them, making this one of the most important and caring financial decisions that you may make.
Not sure where to start? Here are the basics of what you need to know about life insurance:
How Life Insurance Works
Life insurance is a contract between you and an insurance company.
You make regular payments (called premiums) and in exchange the insurer agrees to pay a set sum of money (benefit) to your chosen recipients (beneficiaries) if you die while the insurance policy is in force. Your beneficiaries—who could be your spouse, children, or other relatives—can use this money to cover funeral expenses, household bills, debts, tuition, or whatever their financial needs are.
Your premium will depend on a variety of factors, including your age, health, and the value of the death benefit. Many younger people delay buying life insurance because they think it will be expensive, but generally speaking, the younger you are, the lower your premiums will be.
If you have loved ones who depend on you financially or whom you want to support in the future, getting life insurance is a step that you don’t want to put off. You’ll need to start by considering which type of life insurance plan is right for you.
Term or Perm?
There are two basic types of life insurance—term life insurance and permanent life insurance.
Term life insurance provides coverage for a set period of time, usually between 5 and 20 years. This is what most first-time life insurance buyers start off with, because it’s usually the most straightforward and affordable option. Many parents choose this option to provide coverage for their family until the kids have become financially independent as adults, the mortgage is paid off, and there is less need for a financial safety net.
Permanent life insurance—which comes in a variety of forms, including whole, universal, and variable life insurance—can provide lifetime protection. It comes at a higher premium, but you never have to renew the policy, and it offers some valuable financial planning benefits, which we’ll touch on below.
The Right Amount for You
You may have heard rules of thumb like multiply your salary by 10, but the amount of life insurance coverage you should get really depends on your family’s specific circumstances. Here are some things to consider:
– How much annual income would need to be replaced if you died—and for how many years?
– How much do you owe on your mortgage and other debts?
– How much do you have in savings and other assets?
– How much would you need to provide for your children’s educational expenses?
– How much would your family need to pay for a funeral, burial, and other final expenses?
A trusted life insurance agent will help you determine the right benefit amount, term length, and other policy features for your personal situation.
Life Insurance is a Wealth-Building Tool
In addition to paying out a benefit in the event of your death, most permanent life insurance policies build a cash value, which can prove useful during your lifetime.
Every time you pay your monthly premium, part of that payment is put into a tax-deferred account and earns interest much like a savings account. You can then borrow against this accumulated cash value at any age and for any reason, at rates that are usually much lower than personal loans or credit cards.
In short, both term life insurance and permanent life insurance can give you the confidence to travel the path that’s ahead. Term life plans offer simplicity and affordability, while permanent life plans can deliver additional value while you’re still here to enjoy it.
Ready to Take the Next Step?
Being a member of USECU has its perks—and getting special deals on life insurance is among the best. We’ve partnered with TruStage® to provide insurance services designed exclusively for you, no matter what your needs may be. Get a free quote for term or whole life insurance today!
This information is provided for educational purposes only and is not intended to be financial advice. Consult an insurance professional for guidance that is specific to your situation.
TruStage is a registered trademark of CUNA Mutual Group.
TruStage® Life Insurance is offered by TruStage Insurance Agency, LLC and issued by CMFG Life Insurance Company. The insurance offered is not a deposit and is not federally insured or guaranteed by your credit union.