When you are just getting your financial footing, it can seem odd to think about life insurance. As a young person, you may have few assets. But that doesn't mean you don't have anything or anyone to protect. Life insurance can save those you love from additional financial distress. The time you buy your policy can affect how much you pay in premiums and your choices of coverage.
What Are the Benefits of Life Insurance?
If you were to pass away, your loved ones might have to handle all aspects of your estate. Life insurance pays a lump-sum amount to your beneficiary. These funds may be invaluable to those you have left behind. Even if you are just starting out, life insurance may make sense.
If your parents have co-signed student loans or credit applications, the funds can help them to take care of the debt. If you are living with a partner and co-own a condo or share rent, this could ease the burden of living expenses. Of course, your life insurance payout would go to your beneficiary -- not just whomever depended on you financially.
Changing Needs as You Get Older
When you're younger, life insurance premiums are typically cheaper and you can lock in a good rate for many years. But as you enter your 30s, 40s and beyond, you can still access coverage. This can provide protection for your investments and long-term debts such as mortgages.
In addition, some policies have a cash value that you can draw upon before the end of your life. Some policies also act as an investment vehicle within the policy, essentially paying dividends within the policy, so the death benefit is larger. As you age, premiums become steeper, but you can still leave your loved ones with a death benefit to provide them with added protection.
Types of Life Insurance
Life insurance is usually split into two categories: term life insurance and permanent life insurance. Two other options, universal and whole life insurance, are also forms of permanent life insurance. Many younger people may start with a term policy. It provides protection for a certain number of years, or until you reach a certain age. Term insurance does not have a cash value and once it expires, you'll have to get a new policy, which will likely cost you more.
Permanent insurance lasts your entire life. If you cancel the policy, you can usually get some money back. Universal life insurance is a type of investment account. It's still an insurance policy, but you may be able to make withdrawals or take out loans against the investment. Whole life insurance has a guaranteed cash value and premiums are locked in as you age.
Because of these variations, it becomes clear life insurance might be considered in conjunction with the rest of your financial portfolio.
What's Best for You?
Like any big decisions, it's always a good idea to talk to the experts. You can contact your financial advisor, or look up the latest rates on Insurance Hotline . You can find affordable protection for your loved ones.