Insurance according to wikipedia is a form of risk management primarily used to hedge
against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Life Insurance can be a good thing in helping your loved ones maintain a standard of living if you net worth is not in the range to support them if you were not to be here.
Do you need life insurance? The only question you really have to answer when it comes to life insurance is if something were to happen to you unexpectedly would the people you left behind be able to handle themselves financially. If the answer is no then you more than likely would want to carry some form of life insurance. How much? That will depend on a lot of variables but a good rule of thumb is to look at what your current fixed expenses are as well as any changes and understand for how long will the people you leave behind need that money…often a financial planner will suggest 6-8 times your annual salary as a rule of thumb but discussing your situation is the best course of action.
Types of Life Insurance
Term Life - this is considered the type of life insurance that makes sense for most people. It is typically less expensive than other forms of life insurance because it covers a specific period of time say 20 or 30 years. The insurance carrier does not expect you to pass away in that period of time therefore the premiums are usually much less than those of whole life or universal life insurance.
Remember life insurance was originally designed for younger families where their net worth hasn’t been able to build. It is presumed that the older you get or the more money you accumulate the less life insurance you would typically need.
Whole Life – This is where you are paying for a life policy that does not expire until you pass away. Because the life benefit will almost definitely be paid the premium is generally higher. They do provide a cash value to the policy so if you don’t want it anymore or you need cash you can cash it out but this is not the best savings vehicle especially since you are also paying high commissions on these types of policies.
As always you should consult with a professional but not one that has a vested interest in whether you buy insurance or not to determine what is right for you.
Resources
Here are the internet addresses of some insurance quoting services, I am sure there are many others. You will always want to get quotes from multiple sources given the wide range of prices for ultimately the same product.
- AccuQuote
- Insurance Quote Services
- Term Quote
- Quote Smith
- Select Quote
- Matrix Direct Insurance Services
