September is here once again, ushering in cooler temperatures, changing leaves, and back-to-school activities. It also marks a lesser-known but equally important occasion — Life Insurance Awareness Month. Although making after-life arrangements can be stressful, it’s necessary to ensure the financial security of your closest loved ones. Make the process easier by reviewing this guide before scheduling an appointment with an insurance agent.

Why Life Insurance Is Necessary

Life insurance allows you to continue providing for your family after you pass away by helping cover after-life expenses and relieving the financial burden of your lost income. Once you select a plan and designate a beneficiary, you’ll pay a monthly premium determined by the type of plan you select. If you die during the covered period, a payout will be rewarded to the chosen beneficiary.

There’s a wide range of expenses your loved ones could be left with if you pass away unexpectedly. In addition to funeral costs and estate taxes, your family may be left with mortgage payments, utility bills, and other monthly expenses previously covered by your income. If you have young children, buying an appropriate insurance plan will provide adequate funds for child care and college tuition costs.

Even if no one currently relies on you for financial support, a life insurance plan can be highly beneficial. Monthly premiums are lower when you’re young and healthy and will only increase as you get older and become more at risk for health problems.

Investing in a plan now will save you money when you start a family in the future. It can also ensure that your parents or other relatives aren’t saddled with costly expenses if you pass away unexpectedly.

It’s a good idea to purchase a policy if you’re a young person with student loans, credit card bills, or other outstanding debts. Without an insurance policy to pay off these loans, your family could have to foot the bills.

Which Policies Should You Consider?

Term 

Term insurance policies pay a death benefit if you pass away by a predetermined age or within a specific period of coverage. If you die during this window, your beneficiary will be rewarded with the total amount of your policy.

Term insurance is a popular option for younger individuals and parents with small children. The premiums tend to be more affordable, and coverage can cease once your kids reach adulthood. Once the covered period ends, you can choose to renew the policy or turn it into a permanent option.

Permanent

Also known as whole life insurance, permanent policies have no age or time restrictions. While the premiums tend to be more expensive, this type of plan also functions as an investment, building up cash value as you make monthly payments. 

Most plans allow you to withdraw or borrow against the value of the plan while you’re still alive, which can provide you with the resources to cover unexpected expenses as you get older. As long as you pay your premiums, whole insurance can last forever and won’t expire after a designated period.

Universal

Similar to permanent insurance, a universal policy rewards a specific death benefit to your beneficiaries. You must pay your monthly premiums on time to guarantee the payout.

However, unlike with a permanent insurance policy, you have the option to pay the premiums using the cash value of the plan. If the value is high enough, you can use the accrued interest to pay the monthly fees. Additionally, universal life policies give you the option to change your premium and death benefit amounts without purchasing a new plan.

Variable

This type of insurance also has a cash value and an investment component. However, rather than serving as a simple savings account, the cash value is invested in a variety of sub-accounts that are similar to mutual funds.

Variable insurance is a riskier option than the others. While you might see significant growth in cash value if the stock market performs well, you’re also at risk of losing money. This choice is best for people who are familiar with the stock market and have emergency funds if the economy takes a turn.

Variable Universal Insurance

As its name suggests, this type of insurance features a combination of the components offered in variable and universal policies. In addition to being able to adjust your premium and death benefit amounts, you can use the policy’s cash value to pay your premiums.

However, that cash value is largely dependent on stock performance. This type of insurance tends to be risky and is mostly designed for active investors who can fund most of their policy in the earlier years. 

How to Get Life Insurance

Look at Your Full Financial Picture

Before you sit down with an insurance agent to discuss the various options, it’s important to have a firm grasp on your current financial situation. You’ll need to know how much you spend each month — and how much you anticipate spending in the future — to get enough insurance to cover all of your costs. 

Use a spreadsheet to calculate your current and future living expenses, plus any financial debts you have. In general, insurance agents typically recommend getting a policy that’s worth at least 10 to 15 times your income to ensure your family is covered. You might also have to take inflation into account as you calculate potential costs.

You may need to buy more coverage depending on your debts and family dynamics. Consider mortgage payments, for example. Do you have a loan that your spouse has co-signed? If so, you’ll need a policy that covers the term length of the mortgage in addition to the full amount of the loan. 

You’ll also need to consider how your death might affect your family on a practical basis. Will your spouse need to work less to take care of the kids? Or will they need to work more to afford child care? Talk to your spouse and make a plan based on your unique situation.

Other Requirements

Depending on the type of insurance you choose, you may be required to take a medical exam. Policies that don’t require an exam typically take longer to be approved, as the insurance company will have to review your medical records thoroughly. An insurance agent can help you take into account factors such as your age and health to determine which type of plan is best for you.

 

To secure the best life insurance plan for you and your family, get in touch with the experts at Omega Insurance Group, LLC, in Lincoln, NE. With over 50 years of combined experience, the professionals at this locally owned and operated agency are highly skilled at matching residents and business owners with comprehensive and customized insurance coverage. Visit their website to learn more, or call (402) 465-1167 to request a quote.