It may be news to you but living in Troy gives you an advantage in the life insurance market. That’s nice to hear, but the question is do you need life insurance?
Not everybody does. Those who do, however, will find by comparison the sooner in life they buy insurance, the more affordable it is and generally they’ll find the options more palatable. In fact, the differences in pricing can be significant.
Nevertheless, living in Troy makes the idea of owning insurance more affordable than other locations. So, back to the question. Do you need life insurance?
Before we tackle that topic, let’s first look at what types of insurance is on the market, and how the different plans and policies work to protect your family.
Life insurance exists for one simple reason: to transfer risk
For example, let’s say you have just entered into a major partnership business enterprise. You and your partners together make up the value of the company. If any of you were to disappear from the picture the partnership would suffer, maybe even fail.
Is there a risk here? You bet.
Consequently, there’s insurance products that are put in place to protect each partner if any of the other partners should die unexpectedly. The risk is tabulated to a dollar value of loss, and policies are issued by an insurance carrier to carry the risk. This way, the partnership business is protected against the loss of any of the partners.
Just as there are risk in business partnerships, similarly there are risk in family partnerships. Should one, or the single-family breadwinner die unexpectedly the mortgage will still need to be paid, the children will still need educations, your family will still need to buy food, bills will still need to be paid, and life will go on past the grief.
What are the best insurance vehicles to do the job?
It depends on need, and nobody’s needs are the same. In other words, the type, and how much insurance you need will depend on what it is you have at risk. With this in mind let’s look at the financial risk families face. The few that should top the list are:
- Loss of income
- Loss of housing
- Loss of future income
- Immediate debt
In many cases life insurance agents will offer term life insurance to handle these risks. Term life insurance is typically the most affordable of coverage. On the one hand its affordability makes it attractive, on the other hand, term life insurance is good for the term of the policy. 10, 20, 30 years. Once the term is done, the insurance is done as well.
In contrast, whole life insurance is the most expensive of coverage. However, when you buy a whole life policy your insurance coverage is for your whole life. The argument to avoiding whole life insurance policies is that during your lifetime your needs change. So, as whole life is a one size fits all with a big price tag, it’s best suited for smaller face values to cover immediate debt like final expenses. A small face value whole life policy can be affordable.
An insurance product that you may not hear much about is universal life. Universal life has the unique characteristic that gives you a life time of high face value coverage without the big price tag of whole life or the time limits of term.
Which, and how much of each product should you own?
To be sure, you won’t find out how much of what you need by reading on the internet. Specifically, you need to sit down with an insurance agent and do an analysis of your needs. In many cases you’ll find a variety of plans and policies are in order and because of this, making an appointment with a good agent may be wisest thing you can do for your family.