Insurance For Less Affordable Life Insurance

Life insurance can fulfill a variety of needs, depending on what stage of life you're in. If you have others depending on you for support, you might want life insurance to help them cover expenses and meet future needs. Your beneficiaries can use the death benefit to take the place of your salary and pay for expenses such as day care and college tuition. Because death benefits are usually tax-free, they can be used as a quick source of cash to pay estate taxes and preserve the inheritance of future generations.

In the shorter-term, people often choose to buy life insurance to cover debts such as mortgages and car loans. In addition, life insurance can help pay for expenses at the time of death, such as medical bills and burial costs. Even if you have no dependents now, you can lock in lower premium rates for permanent life insurance by buying a policy while you're young.

A good rule of thumb is to buy life insurance equivalent to five to eight times your annual gross income. You should also consider individual factors such as income potential, ordinary expenses, extraordinary expenses, and federal estate taxes. Premium rates are generally determined by age -- the younger you are when you buy your policy, the lower your rates will be.

Difference Between Term And Permanent Life Insurance

There are two main types of life insurance: term and permanent.

  • Whole life, universal life, and variable life are names for different varieties of permanent life insurance.
  • The main difference between term life insurance and permanent life insurance is simple: term life insurance covers you for a specific time period, or term, while permanent life insurance covers you for your entire life.
  • (Refer to the Types of Life Insurance section for a more detailed discussion of the different kinds of life insurance.

    What Kind Of Life Insurance Is Right for You

    Term life insurance is most appropriate for

  • people who want: Coverage for a specific time period, such as the duration of a mortgage or car loan.
  • Lower premiums that allow you to buy more coverage when you need it the most, such as when you have young children.
  • Coverage until you are able to build up your other assets.
  • Permanent life insurance is most appropriate for people who want:
  • Coverage for your entire life, as long as the premiums are paid.
  • A cash value that you can borrow against, surrender for cash, or convert into an annuity.
  • A policy that accumulates cash value that can grow tax-deferred.
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