If you're single and have little or no debt, you probably only need
to consider the cost of final expenses in case you were to die. If you
have a sizable savings account or other assets, you may not need to
worry about life insurance at all.
But if you are married, especially if you have dependent children,
or if you have debts such as a mortgage, car payment, or credit card
balances, your family could be at serious financial risk if you should
die suddenly and your income were suddenly no longer available.
If you've finished raising your family and paid off your mortgage
and other debts, your life insurance needs are different than when you
were younger. But you'll still need to make sure final expenses are
paid. And if you're married, your spouse's income may be considerably
less with you gone. Enough life insurance can help to "fill the gap".
Life insurance "in a nutshell"
When you buy life insurance, you're grouped with other people
similar to you in age, sex, and health. Professional actuaries -
business professionals who deal with the financial impact of risk and
uncertainty - calculate how many people in each group are likely to die
in a period of time. The more deaths there are in a group, the more
money will be needed to pay death claims. As you might expect, since
younger people are less likely to die than older people, insurance
premiums are generally lower at younger ages.
Two kinds of life insurance
Life insurance can be viewed like real estate. Consider if you rent
a house, you'll have the right to live there for a specified period of
time, but you won't own the property, and you won't benefit if the
property value goes up. Also, the amount of rent you pay may increase
from time to time.
If you buy a house, on the other hand, you may make higher monthly
payments, but you'll gain equity in the house that you can keep. You'll
also have the right to sell the house, pay off the mortgage, and keep
any money remaining from the sale. If the property increases in value,
you will benefit if you sell the property. And your house payments
probably won't change over time.
Term insurance is like renting a house. You pay premiums for the
specified term of the plan and receive insurance coverage during that
time. At the end of the term, depending on the plan, you may have to
re-qualify for coverage or renew it at a higher rate if you wish to
continue your protection. If your health has changed, you may not be
able to qualify or you may have to pay a higher rate.
Term insurance is pure protection that doesn't build cash value. As
a result, it's often a fairly low-cost option at younger ages.
Generally, either the cost goes up or the protection goes down at older
ages, when the risk of death is greater. At some predetermined age such
as 65 or 80, the coverage will generally end. USBA's Long Term 20 and
Lean~15 plans are examples of term coverage.
Whole Life insurance is more like buying a house. It costs more than
term insurance, but over time it builds cash value that grows
tax-deferred. You can use the cash value in a variety of ways. For
example, you can surrender the policy for its cash value, take loans
against it, or use it to purchase paid-up insurance. The premium and
the death benefit generally stay the same while you own your coverage,
and you can keep it for the rest of your life, not just until age 65 or
80-even if your health changes.
Whole Life coverage is often a good option for buyers who may not
need a large amount of coverage, but want guarantees that their
premiums won't go up and their coverage won't end. USBA's Fifty Plus
Whole Life plan is an example of Whole Life coverage.
Many other varieties of Term and Whole Life plans are available through USBA. Call us at (800)368-7021 or Contact Us conveniently online to learn more.
Don't skimp on life insurance
If you've talked to an agent to estimate the amount of life
insurance your family needs, you may feel overwhelmed by the cost of
the recommended coverage. But even if the full recommended amount of
coverage is too expensive to consider, you have options that will help
you protect your family.
If you can't afford coverage to replace ten or fifteen years of
paychecks, maybe you can afford enough for five years. Also, you can
purchase inexpensive accidental death & dismemberment (AD&D)
coverage to go with your regular life insurance. If you were to die as
a result of an accident (a leading cause of death, especially at
younger ages), your family could then receive benefits from both your
life insurance and AD&D plans.
It's easy to make the mistake of thinking that life insurance
provided through your job will always be available for your family, but
don't forget, employer-sponsored life insurance usually ends when you
change jobs or retire. Insurance you buy for yourself can see you
through all kinds of life changes and may give you more options for
continued coverage during your retirement years.
Whatever you do, please don't leave your family unprotected. For a
free consultation on what will work best for your family, call us at (800) 368-7021 or Contact Us conveniently online to learn more.