Written By Afina on Saturday, September 29, 2018 | September 29, 2018
What's the Right Life Insurance
It's time we have Life Insurance, not only those who are elderly, even young and healthy ones.When we are married, life insurance is not something you buy for yourself, but something you buy for someone you love - your parents, your spouse, your children (if you have one), even your little brother who sucks. This protects people who depend on your income and those who will be trapped pay off your debt if something happens to you.
But only 36% from 18 to 29 years have life insurance, according to a study conducted by Princeton Survey Research Associates International. When asked why they do not have it, most millennials say the price is too expensive. Wrong again. As a healthy young adult, if you enter $ 20 per month into a term life insurance policy, your family can receive a $ 500,000 payment if you die. Given that you might be able to buy life insurance, what and how much do you need? Here is a brief guide for beginners.
When you come to a life insurance policy, there are basically two types: term life and whole life. (To take a closer look at the differences, see Whole Life Insurance or the Future: Which Is Better? And Understand Different Types of Life Insurance.) The term insurance policy covers you for a certain period, usually between five and 30 years. This policy is relatively affordable because it is designed solely for financial protection, such as emergency funds. They are not intended to be an investment of cash accumulation. In general, the older you are, the fewer people who rely on your income. That means your need for this type of life insurance decreases with age. The term life is a good choice for parents, for example, who want to protect their children until they are big enough to take care of themselves financially.
All life insurance, also known as permanent life, remains valid for your entire life, provided you keep paying the premium. However, all life is far more pricier than that term. In fact, for the first few years after you buy a permanent life insurance policy, your premium may be higher than the actual insurance protection fee. Some people prefer all life because this policy accumulates cash value, which means they can be used as investment vehicles. However, compared to other investments such as mutual funds, the growth rate of cash value life insurance policies is quite small. That is why many financial advisors will tell you that all life is not the smartest investment. Between the whole period and time, what type of life insurance makes the most sense for a healthy young generation? In many cases, the term life policy is sufficient and will serve as an effective financial safety net for anyone who depends on your income. If you die in the next 20 or 30 years, they will be closed. Meanwhile, you also have to build nests through other investments, such as individual retirement accounts (IRAs), 401 (k) or other retirement plans.
The amount of life insurance you must have depends on your current status (single, married, married to children)
➽ Married. Now the situation is a little more complicated. Even if your partner works, he may depend on your income. Consider how it will affect your partner financially if the second salary suddenly disappears. You not only have to take into account the extraordinary funeral and debt costs, but you also have to pay attention to your current budget and living expenses. Think about how much time your partner needs to rebuild a reasonable income. Depending on your situation, it can be three years - or 20 years.
You should also consider the additional costs that your partner might face if you die. Does he have to go back to school, for example, to get a degree? Crunch all these numbers, and you will come out with the minimum amount of life insurance coverage you need. Then add another 5-10% as an extra pillow, to be safe.
➽ Single without children. Most likely, your parents will be beneficiaries of your policies. If that is the case, you may only need enough life insurance to cover your funeral expenses and extraordinary debt. Basically you pay for peace of mind, knowing your parents won't be stuck with funeral bills, car payments, student loans, and other debts if you die. (Mom and Dad will thank you.)
➽ Married with children. You will need more coverage. Consider all the additional costs related to your child that your partner must pay from now until your child leaves the nest. That may include childcare, private school fees, tuition, even marriage fees. Again, after you know the baseline, add a little extra just to make sure everything is closed.
Some experts say the death benefit in your life insurance policy must be around seven to 10 times your annual salary. Although this may be a quick and easy way to produce rough estimates, this is not an exact measurement of the amount of coverage you need. Of course, you will need a death benefit that is greater than your friend's needs.