It’s easy to delay the decision about purchasing a life insurance policy, but the longer you and your loved ones aren’t protected, the greater your risk of developing a medical condition – or worse. And as a result, you can face higher premiums.
In a guest column in Oregon’s Estacada News, insurance professional Aimee O’Brien advises consumers of the many different types of life insurance products that can fit a variety of budgets, including products for younger people who are considering a term life policy.
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O’Brien says unmarried people may want to consider a policy that provides investment income in the longer term. She adds that working a life insurance policy into your budget could spare your relatives from having to pay your funeral costs upon death. She suggests that for similar reasons, people also consider a policy for their children.
Especially if your children have a minor current medical condition or there is a strong history of family illness such as diabetes, cancer or heart disease, it may make it difficult to get insurance in later years. There may be some benefit that a policy would help pay for college but you really need to consult a life insurance agent to determine the eligibility of this option.
Selecting quotes for the correct type of life insurance can be daunting, but as it’s also an important decision, here are our guidelines to help you narrow down life insurance options.
Consider Term Life Insurance If:
You require life insurance for a specific period of time. Term life insurance lets you match the length of the term policy to the length of your needs. If you have young children – and want to ensure that funds will be available to pay for their college education – you might buy 20-year term life insurance. If you want the insurance to repay a debt over a specified time period, buy a term policy for that period.
You need a large amount of life insurance but are working with a limited budget. This type of insurance pays off only if you die during the term of the policy, so the benefit is lower than it would be for permanent types of life insurance. If you’re still once the term ends, coverage ends as well unless you renew the policy or buy a new one. Unlike a permanent insurance policy, term policies won’t typically accrue equity in cash savings.
You might also consider convertible term policies. They allow for conversion to permanent insurance – without a medical examination – but at the cost of higher premiums. Premiums are lowest when you’re young and increase as you age when they’re renewed. A few term insurance policies can be renewed when the policy ends, but the premium are likely to increase as well, and some policies will require a medical examination at renewal.
Consider Permanent Life Insurance If:
You need life insurance which covers the full span of your life. Permanent policies pay a death benefit regardless of how long you live.
You wish to include and an element of savings which grows – on a tax-deferred basis – and can also be a source from which you can borrow funds. This savings element can also pay premiums to keep the policy in force should you be unable to make the premium payments. Another benefit? You can borrow funds accrued by the policy even if your credit score takes an unexpected hit. The death benefit becomes collateral to secure the loan, and should you die before it’s repaid in full, the insurance company will collect their end before delivering the remaining funds to your beneficiary. The premiums paid for permanent policies are often higher than for term insurance, but the premium in a permanent policy remains the same no matter how old you are. Term life policy premiums can rise significantly each time they come up for renewal.
There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. For more details, see our articles on the specific types of policies.
What it really comes down to is your own personal financial status and how affordable it would be to insure your children. If your income is adequate, it may be in the best interest of you and your family to look into life insurance.