While life insurance plans are one of the most sought after investments, however, not many seem to comprehend the need to buy life insurance or when should they buy one or which type of life insurance is for them. Fret not! A keen read of this article will steer clear your doubts and queries related to life insurance.
In this article, we will discuss the various types of life insurance and which one will work best for you at significant milestones in your life.
Types of life insurances:
Predominantly, there are two types of insurances:
- Term insurance
- Permanent insurance
Let's take a detailed look at them below:
Term insurance:
Term life insurance offers a predetermined death benefit. It provides you with a cover for a certain number of years – minimum being five and the maximum is 30 years. In this type of life insurance, the annual premiums are fixed. Additionally, the premiums are based on your health and life expectancy since the time you apply for the policy.
Permanent insurance:
Permanent life insurance offers both death benefit along with savings or investment account. This policy also provides you cover for as long as you live. Premiums, however, can either be fixed or changing. The premiums in permanent life insurance plans are generally based on your health and medical history.
Now that we've known what the types of life insurances are let's take a look at which one do you need. If you are:
Single with no dependents:
If your insurance is going to take care of just you, then term insurance is good. With this type of life insurance, an unfortunate event will not your loved ones in any financial bind, unlike other insurances. In case there is a possibility of someone being dependent on you, then this life insurance can come in handy.
Married:
Your life insurance will come handy even you are getting married. Significant expenses such as buying a house or buying a car or even planning for children will be in the pipeline. And, you will require term insurance soon. Many types of life insurances tend to get expensive as you older, as life expectancy reduces. So, it's best to get insurance as soon as you are married, young, and healthy.
New parents:
Perhaps one of the most crucial time to buy life insurance. New parents have dependents, and thus it is advisable to buy a permanent life insurance plan. Buy this insurance as soon as you learn that you are expecting another member in your family. Permanent life insurance will offer cover to your child and your family if you or your spouse pass away.
Retirement:
It is important that you buy insurance before you retire. As you reach your retirement age, your term policy will probably run out. Additionally, given your chances of life compared to death increase substantially, hence you must buy a permanent life insurance plan before you retire. Once your age increases, the insurance company will have to pay a death benefit, and you become a riskier customer for them. At such times, the insurance companies will ask you to pay accordingly.
If you're financially independent, then, you can insure yourself. However, it is advised to re-evaluate your life insurance needs at every milestone of your life and buy the type of life insurance that secures both – you and your family, in the long run.