Life Insurance Options

Life insurance is not something that many people like to talk about. When we talk with our clients about getting this form of insurance, there is a little apprehension on their part. Most people don’t enjoy thinking about life after they are gone.

However, like taxes and other responsibilities, getting insurance on your life is an essential part of being a responsible adult and creating a sound financial plan. Although people have heard it repeated time and time again that they need this insurance, we have seen that many will procrastinate until they face a life-and-death situation that encourages them to purchase it.

There are several benefits to purchasing insurance early on, especially for people who have debt, are married, have children, own a business, or are planning on starting a family.

How Do Term Life Policies Work?

When we talk about term life policies, we are talking about a simple type of insurance to understand. Either you use it or lose it.

Every year, you will pay a premium. The term of the policy is the number of years the policy is enforce. For most people, it’s 20 years. If you die within the 20 years, your beneficiary will receive the amount that is shown on the policy.

For example, a $1 million policy with a 20-year term will cost around $600 a year. If you die within that 20-year period and you are up-to-date with your payments, your beneficiary gets $1 million tax free.

How Does Whole Life Insurance Work?

This is a permanent life policy. It means that you are covered for your entire life as long as you pay your premiums on time. Whole life policies have a savings component to them called “cash value.”
Some benefits of this type of policy include:

  • Your premium never goes up
  • You can withdraw funds or take out a loan against your policy
  • Guaranteed benefits for as long as you keep your payments current

Reasons Why You Need Life Insurance

When determining whether this type of insurance is right for you, think about if your death would adversely affect someone close to you in a financial sense. The last thing you want is for your loved ones to assume your financial responsibilities while grieving because of your death.

If you have debt, personal liabilities, or a business, your next of kin is responsible for these things. This means that your parents, your brothers and sisters, or your spouse may have to pay your debts.

If you are a business owner and your family lives off of the income you make from your business, it is good to think about what would happen to your business if something happened to you. Purchasing insurance on yourself may give your family the financial cushion they need to keep the family business going.

How Much Insurance Should You Purchase?

There is no easy answer to this question. First, think about some of the variables we mentioned above. As a general rule of thumb, insurance agents encourage somewhere between seven and 10 times your yearly salary. A person who makes $100,000 a year would want between $700,000 and $1 million of insurance.

However, for a person who has a more complicated life, including a large family, debts, and a business, they may want to increase that amount. Financial advisers are a good source to turn to when determining the amount of insurance you should purchase.

Adjust Your Policy to Meet Your Needs

If you have an old policy that you took out a decade ago, review it with a financial adviser. If your life has changed, you may need to add more insurance.

There is a benefit to having an additional insurance policy even if your employer has a group insurance policy. Most group life policies will cover three times your salary. Even if that’s enough, what would happen if you change jobs or get fired? You would suddenly find yourself without a life policy.

Remember, insurance gets more expensive the older you get. Policies can be two times as expensive for someone in their 40s as opposed to someone in their mid-30s. Purchasing insurance early on can prevent it from becoming a financial burden.

Norton Insurance Agency is a full-service insurance agency serving Cheraw, South Carolina. Our focus is protecting our clients by giving them sufficient coverage for their business, auto, farm, home, and life. We work hard to develop a relationship with our clients and create an environment of trust and reliability. We help our clients find the coverage that best fits their unique personal and business needs.

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