Life Insurance is a financial product that provides a lump sum cash payment, also known as the death benefit, when the insured passes away. The purpose of life insurance is to provide a financial benefit to dependents upon the premature death of an insured individual. Buying life insurance can protect your spouse and children from the financial hardships that could result if something happened to you. It provides financial security, helps to pay off debts, helps to pay living expenses, and helps to pay any medical or final expenses.
The Younger the Better
When it comes to financial planning, it is common knowledge that the earlier you prepare, the better off you will be in the long term. This same concept goes hand and hand with deciding when to buy life insurance. This is because, at a younger age you’ll qualify for lower premiums. In contrast, as you get older you could develop health problems that make insurance more expensive or even disqualify you from purchasing a plan.
While paying off mortgages, car loans, and student debt is crucial to maintain financial well-being at a young age, it is extremely important to plan for your family’s future. Missing out on buying life insurance at a young age can have the same economic impact as deciding to postpone saving for retirement.
When to Purchase Term Life Insurance
Term life insurance is a low-cost way of providing maximum coverage for your family. Protection is provided for a limited number of years. The insurance expires without value if the insured lives beyond the policy period, usually 5 to 30 years. Unlike other forms of life insurance, term life doesn’t have a savings or investment component. Without these aspects, companies can offer substantial death benefits at lower rates. This option is often attractive to individuals who have temporary financial needs to cover, as they can afford much more life insurance at a reasonable cost.
When to Purchase Universal Life Insurance
Universal life insurance is characterized by great flexibility. Policyholders can determine the amount and frequency of premium payments (i.e., the more you pay, the less time you will need to pay). Your premiums cover the insurance part, as well as the savings or investment element and the expense part. Universal Life policies are designed to last the insured’s entire lifetime, building cash value over that time.
Universal Life is generally purchased by individuals who want to achieve a death benefit that lasts your whole life for the least amount of premium. Universal Life policies can also be great for individuals who have maxed out their investments and want more money without going into a higher tax bracket. With careful planning, a universal policy can be a great financial tool for individuals seeking long-term protection and potential growth opportunities.
When to Purchase Whole Life Insurance
Whole life insurance provides permanent protection for the whole of life, from the date of policy issue to the date of the insured’s death, provided that premiums are paid. Premiums are set at the time of policy issue and remain level for the policy’s life. Unlike term insurance, whole life combines insurance protection and savings or cash value which builds over time. Cash value build-up may provide a source for living benefits, for example, helping pay off a mortgage, or a child’s education, or cash surrender value if the policy is ever canceled. If held long enough, what you accumulate may be able to supplement retirement income. However, the money needs time to grow, which is why an early start is essential.
Long-Term Care & Hybrid Insurance
Long Term Care is the type of care received either at home or in a facility, when someone needs assistance with activities of daily living, such as bathing and dressing due to an accident, an illness or advancing age. With national median cost of a nursing home being over $4000 per month, having to pay long-term care costs can quickly drain your life savings. It is particularly important to consider protecting yourself against this demanding expense with long-term care insurance.
Hybrid life insurance products provide long-term care coverage if there is a need, or a death benefit if the policy isn’t used to pay for care. While Medicare will pay for temporary stays in nursing facilities for therapy and rehabilitation, it will not pay for long-term care which requires assistance in the daily living activities listed below.
- Bathing
- Dressing
- Eating
- Using the toilet
- Transferring (to or from a bed)
- Caring for incontinence
Long-term care insurance can be used to pay for assistance if the policyholder can’t perform two of the six activities listed above. Many long-term care policies will also cover modifications to your house to make it easier to receive care at home. The amount of coverage a policy can provide will depend on the benefit period and the benefit amount you choose. For example, a long-term care policy with a $4000 monthly benefit and a three-year benefit period, would have a maximum benefit of $144,000.
The Bottom Line
The longer you wait to buy life insurance, the more expensive it will get. Unfortunately, the longer you wait, there’s a higher chance of worsening health which could disqualify you for some forms of life insurance at that point. When you should get life insurance ultimately depends on your personal and financial situation. Ultimately, life insurance will be less expensive when you are young. If your financial situation is not the best, a term life policy can offer a financial ladder for your loved ones. On the other hand, a permanent life insurance policy can offer a cash value component that can grow substantially over time.
Let us Help you
Finding the right life insurance products can be challenging in today’s insurance environment. As independent agents, we are free to choose the best carrier for your insurance needs. We do not work for an insurance company; we work for you, our client. At Boettcher Insurance, we have access to many of the top 100 life insurance providers including top Fortune 500 companies. We are more than happy to review your current benefits and place your account with the company that will provide you with the coverage and benefits you want.
Boettcher Insurance Agency offers free, comparative quotes on life insurance policies from multiple insurance carriers so you can get the best possible rate.
Want to see how much we can save you? Just request a quote to find out.
Written by McKay Moravick
