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Thinking About Life Insurance?

Buying life insurance can be a complicated process, and choosing a policy that is appropriate for you is a very individual decision. Choosing the type and coverage that fits you and your beneficiaries has many different variables, and today we will discuss a few.

"Do I need life insurance?" This is a question we are asked on an almost daily basis, and though there usually isn't a yes or no answer, and this is very dependent upon your own opinion, there is one question I like to ask to help individuals evaluate their life insurance needs. "If something were to happen to you, how much financial need would your loved ones have if any and for how long?" The idea of life insurance is to protect your beneficiaries financially should anything happen to the insured individual covered by the policy. For example, if you are the financial provider for your family and you were to pass away, how large would the financial gap be for your beneficiaries without your income, and for how many years would that income be necessary? Once you add up that number, that may be a good starting point when you are deciding coverage amounts.

The next step is to evaluate what kind of life insurance policy you would like to purchase based on your coverage requirements. Below are three of the most common choices:

Term life insurance: Term life insurance covers the insured individual for a specified period, usually in 5 year increments. This is also often the cheapest type of life insurance. Term life insurance is often purchased by individuals who only need coverage for a specified amount of time. Two examples of this would be while raising children until they are financially independent, or covering a spouse without income until retirement age.

Whole life insurance: Whole life insurance is designed to cover the insured for the duration of their life. This type of insurance is typically purchased by an individual who has beneficiaries with costs that will exceed the life of the insured like large estate taxes or care of an adult dependent child or spouse. This insurance is also purchased sometimes by individuals for the ability to utilize what is called "cash value" inside of their insurance policy. Cash value takes a portion of the premiums paid into the policy and invests them via an investment method which varies greatly depending on the policy type. Though there is no guarantee as to how much the cash value of a policy can grow, some individuals prefer this type of policy for the potential for accessible growth within their life insurance policy. In a whole life insurance policy, the investments usually grow in a fixed style investment method, but that is not always the case.

Universal life insurance: Like whole life insurance, universal life insurance is designed to be a permanent type of insurance that also builds cash value. Individuals sometimes choose universal insurance because of its flexibility with premium contribution amounts, the ability to change the death benefit amount, and the various crediting strategies for how the cash value portion of the insurance policy can grow.

Insurance Riders: Riders are additional benefits which can be purchased for an insurance policy to cover individual or specific insurance needs for the policy holder. These riders vary greatly in the benefits they can add to a policy, and also to the premium amount the policy may cost. 

If you aren't sure if life insurance is a good idea for you, or what kind of insurance would be appropriate for your goals, let us know and one of our insurance professionals will be happy to help answer any of your life insurance questions today.

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