You know that you do not really buy life insurance for yourself. We do not like to talk about it, but of course, you will not be able to benefit from the death benefit of a life insurance policy that covers you. You do buy life insurance to protect people you care about.
Most of the time, we think about buying life insurance to make sure our family is provided for. We think about our spouses, our children, our siblings, and our parents. Or sometimes we buy life insurance in order to protect a business we have a personal stake in. We know that our contribution to our company is valuable, and that without us, some value would be lost. But in any case, we are purchasing coverage to provide a death benefit and that is all.
But sometimes we do buy life insurance as an asset to be used while we are still alive. Sometimes we see the tax advantages of cash values that can be built in permanent policies like whole or universal life. We see that we can use this cash value as an asset, cash it in, or borrow against it later like having our own personal bank.
The point of this is to make you see that you need to examine the reason you want to purchase coverage anyway! If you know what you need and expect, and then understand which product can help you, you can make a good decision. Remember, your coverage contract is usually a long term contract, so you want to make a decision for reasons that will hold up over time.
So, if you just want to protect your family, and make sure they are provided for during your working years, then you will probably want to consider a lower cost term policy. You can consider the amount of your home mortgage, other outstanding debts and obligations, and long term plans for education. Then think about the time frame you will need to buy coverage for. You should have a good idea of how long you want to make your term, and how much money your death benefit should be.
However, if you want to transfer money to your beneficiaries when you pass away, even if you are older (and we all hope we are older), consider a whole life policy. The policy will cover you as long as it is kept in force. Keeping it in force usually means that the premiums are paid, or the policy is paid off. A permanent policy can also build a cash value that can be used while you are still alive. With these additional benefits, understand you will be paying a higher premium.
For many of us, a combination of a larger death benefit on a term policy, and a lower death benefit on a while life policy, may be ideal. We have the large amounts of coverage we need now, and we also have planned for the future.
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