When is the Best Time to Buy Life Insurance?

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We don’t want to sound like a sales rep here, but the truth is: any time can be the best time to buy life insurance! Perhaps a better question to ask is “What type of life insurance do I need right now?” Life insurance may seem complicated, but EINSURANCE.com is here to help! We will try to answer these questions for you now, but feel free to contact us directly to speak to a licensed insurance agent.

There are so many different types of life insurance, in this article we will break them down into two manageable topics and show you when is the best time to buy life insurance.

We should also point out that many people have several types of life insurance at once. If you already have one policy, there’s no law that says you can’t get another.

Read More: Can You Have More Than One Life Insurance Policy?

When Should I Purchase Term Life Insurance? What is Termlife?

“Term” means time. Term life insurance will protect you for a certain period of time. It could be five, ten, even thirty years.

  • During your “term”, you will pay the same premium each month for coverage.
  • Rates are generally very low.
  • Insurance companies can’t increase your rates during your tenure unless you don’t pay the bills (or if they find out that you lied about something important, like lying about your age, or claiming that you’re cancer-free otherwise).

Term life insurance is perfect for:

  • Single parents who can’t afford large premiums, but want to know their children are protected financially.
  • Couples who want to leave money for their spouse or children.
  • People who have huge mortgages to pay for their homes, and want those homes paid off if they die.
  • Anyone who wants to bequeath a sizable property to the heirs.

The important point we need to make about term life insurance is that it’s not permanent. After each time period is over, you can make a new contract with the insurance company. Naturally, every time you renew this contract, your price will probably increase.

  • A healthy 40 year old will pay less than a healthy 50 year old, for example.
  • Tobacco use dramatically affects your price for almost any type of life insurance.

Any moment in your life is a good time to buy term insurance. If you lie awake at night wondering what will happen to your loved ones if you die, or what will happen to YOU ​​if someone important dies, term life insurance will solve those doubts for you.

We must point out that unlike life insurance policies, term policies do not establish cash value. They are not investments. It blends well into our next type of insurance: whole life.

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When Should I Purchase Whole Life Insurance?

Whole life is another way of saying “permanent” life insurance.

  • Unlike the term, whole life is meant to be a contract that lasts your whole life.

It may seem a lot more expensive than term life, but that’s because the insurance company will allocate a portion of your premiums to an interest account in your name. In other words, whole life insurance is a long-term investment. Yes, it provides cash benefits to the beneficiary if you die, but it also builds cash value over the years.

That cash value can be useful later as:

  • some cash, if you fully cash out your policy
  • save money that you can borrow, and pay back the insurance company quickly
  • guarantee if you need to get a large loan, you can prove to the bank that you have funds set aside and can pay them back

In some cases, you can sell your entire life insurance policy to a life settlement company. (If you’ve heard the term “hedge fund,” this is what it means.) It works like this:

  • You have a $100,000 lifetime insurance policy. You’ve been paying for it for fifteen years.
  • The current cash value is $20,000.
  • The life settlement company will buy the policy from you for more, maybe $50,000.
  • The company now owns the policy and will continue to make premium payments until you die.
  • They will collect a $100,000 death benefit upon your death.

*(Please note, the figures are for illustration only, your actual benefit may be higher or lower, we don’t know your contract details.)

Whole life insurance is perfect for:

  • Young, healthy people who want to protect their loved ones and build investments.
  • Parents, who want to start their children with financial nest eggs for their future.
  • Anyone who wants to leave an inheritance to the heirs.

Nobody wants to imagine a tragedy, but one of the best things you can do for young people is to buy them a whole life insurance policy when they are young. Since their premiums never increase, you can get coverage for just a few dollars a month. Over time, those few dollars will earn interest, and eventually your loved ones will have plenty of money.

Years from now, the child may use the funds to:

  • help fund their education
  • pay down payment
  • down payment for a new car
  • leave them alone and build a retirement fund

What is Universal Life Insurance? How about “Flexible Living”?

Universal life insurance policies, also called flexible life insurance policies, fall into the whole life category. In short, this policy allows your income to change throughout your life.

  • If you are earning a large income now at 40, but hope to retire at 65, and want to pay lower premiums by then, this type of insurance may be your best option.

What About Funeral Insurance, Pre-needs Insurance, or Final Needs Life Insurance?

All these lifetime policies are meant to pay for your last wish. Generally the death benefit is small, ranging from $1,000 to $25,000 on average, and it’s meant to pay for your burial or cremation, and all the services therein (embalming, cosmetology, monument carving, and so on). In most states, there are two ways you can access this kind of policy:

  • through your life insurance agent
  • through your family’s funeral home
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This type of policy is also great to buy at any age. Remember, the longer you have a life insurance policy, the more it is worth. So even if you’re young enough, the interest earned on a small funeral insurance policy should certainly cover inflation and the increased cost of your final wish.

Avoid These Common Mistakes When Buying Life Insurance

1. Assuming your group life insurance is sufficient.

Many employers provide group life insurance as an advantage, but it may not be enough for your needs. When you leave the company, it may be over. Be sure to consider your other options and add to your group insurance policy.

2. Get the wrong type of life insurance policy.

Make sure you understand your options before deciding which type of insurance to buy. Should you get a term or permanent? With term insurance, your payments occur over a period of time, say 20 or 30 years. If you outlive your policy, no one will receive the benefits. Permanent (whole, variable and universal), however, has no such limitation. Permanent policies are more expensive, but have cash value. Learn more about the differences, and the pros and cons of the different types, here.

3. Thinking you are too young to get life insurance.

Buying a life insurance policy while you are young and healthy may be the way to go. Your policy will be cheaper than if you waited until you were older. Rates increase with age and become less healthy.

4. Choosing minors as heirs, or not appointing heirs at all.

If you don’t name the beneficiary and leave your insurance payment to your estate, it could be stuck in probate for a long time. Do not name minors as beneficiaries. Instead, name a trusted adult or set up a life insurance trust for your children. Be sure to identify the trustee. Find out more about naming beneficiaries in our article Who Would You Name Your Life Insurance Beneficiary?

5. Not comparing policy rates.

Don’t just follow the first policy you get the offer. Compare rates and find out how much you would pay for the same policy coverage with different providers. Life insurance quote tools can help you find the policy you need at the best price.

Should You Buy Life Insurance For Children?

Two main reasons to buy a child life insurance policy:

1. To cover expenses if the child dies.

A policy can help fund medical bills and related funeral expenses.

2. Guarantee the coverage of children as adults.

If the child has a health condition, he or she may be denied individual life insurance as an adult. A policy purchased for a child allows them to purchase a policy as an adult without having to have proof of insurability.

If you have the financial means to cover large expenses when they arise, you may not need to purchase a life insurance policy for your child. Affluent parents are better off investing money in a college savings plan like the 529.

In closing, we hope you enjoy our blog about the types of life insurance, and when you should buy one. Each individual has their own goals and struggles, and EINSURANCE is here to help you make the right life insurance choices. Call us today for a free quote, or to discuss the right type of life insurance for your needs.

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