How Much To Purchase
Knowing how much life insurance to purchase can be just as overwhelming as choosing a company to purchase it from. How much insurance you need greatly depends on your financial status and your needs. Someone with a substantial personal wealth might need more life insurance than someone who has a smaller net wealth. Ideally, most people purchase enough life insurance to allow their beneficiaries enough funds to purchase their home and a little extra to cushion any significant financial loss by their death.
First, determine what kind of insurance would suit your needs. There are several types of insurance plans offered, although not every plan is offered at every company and terms may vary by state. The basic plans are term life, whole life, endowment life and universal life insurance. Term life insurance is the oldest and most affordable of the life insurance plans.
Basically, term life insurance provides a predetermined amount of protection for a set term. So, if you purchase a term life plan that will expire in ten years then you will only be covered within those ten years. Even if you paid the premiums all ten years and died the day after the policy expired your beneficiary would no longer be able to make a claim on the policy. This insurance is ideal if you are only looking to cover yourself for a short time. For example, some people purchase these plans if they are planning a long trip to a foreign country.
Consider Whole Life, Universal and Endowment Life Insurance
The next step up from term life is whole life. Just like the name, whole life insurance covers you for your whole life. The premiums can be paid in one lump some at the beginning of the policy or paid out over a number of years.
Unlike term life, once you are done paying the premiums you are still covered until your death even if it’s 20 years after you complete the payments. Many policies have tight restrictions and conditions that must be followed to make the policy viable.
Universal life insurance has a dual purpose. It works as a death benefit and a sort of endowment. The premiums can be paid much like a whole life policy and pays out death benefits like a whole life policy. Unlike whole life there is a cash account portion that matures around the age of 95 and up. Once the insured reaches this age, then the policy can be cashed in for face value.
Endowment life works like universal life but with a larger cash value component and higher premiums.