A question that is very frequently asked by most people is “Should I get a life insurance policy?” Life insurance compensates a person who is insured during the time that the policy is active. Moreover, life insurance also provides money needed to pay for many circumstances. These include burial, mortgages, loans and supports your family while they get back on their feet. However, many people who have little income believe that life insurance is just for the wealthy. But the truth is that life insurance is far more necessary for those who cannot support themselves against the rough times of life.
These are some factors you should consider when choosing life insurance:
- Your dependents
- Your mortgage or other debts
- You own a corporation or are a key employee in a business
Responsibility of Dependents
Life insurance comes in handy the moment you are responsible for another person in your life. This policy becomes a necessity when someone else such as your children, spouse or employees rely on your ability to earn an income. Moreover, your spouse and children can also have life insurance if you possess supplement life insurance. New hires select spouse or domestic partner coverage in increments of $10,000 up to $250,000 and $2,000 to $10,000 for your children. Evidence of Insurability (EOI) is not necessary for coverage up to $20,000 for your spouse or domestic partner. However, children does not require EOI. Spouse or domestic partner life insurance rates are the same as the supplemental life insurance rates. This is according to your age and child rates are from $0.09 to $1,000 per month.
Mortgage and Debts
Life insurance requires you to pay off the remainder of your mortgage. Your heirs will have to deal with the debt if you don’t have any insurance when you die. In some cases, family members can also be liable for the capital you owe. Many people purchase life insurance so they do not leave something behind for the ones they love. This insurance helps deal with any debts and final expenses.
The estate becomes responsible for your debts after you pass away. You owe your estate everything you did not pay off. Probate is the process of paying your bills and distributing the remainder. The executor of your estate is the person who deals with your will and estate after your death. He will utilize your assets to pay off whatever you owe. This could mean writing checks from a bank account or selling property to obtain the money. Creditors are out of luck when there is not enough to cover your debts.
Under Federal Trade Commission rules, debt collectors are able to contact the family of the person who dies to discuss the amount they did not pay. Additionally, the collectors must notify the guardian, executor or administrator in the case of a child’s death. However, collectors may not mislead family members into thinking they’re responsible for paying the debts if they’re not. It is legal to tell a debt collector to stop contacting you by sending a letter.
Business owners and main employees
A life insurance policy is very beneficial to business owners or anyone who is a crucial employee of a corporation. This is because life insurance keeps your business running. Your employees or partners are able to make arrangements to dissolve the company according to your desires. Nevertheless, investing in life insurance can be a business expense if you utilize this policy in such a way.
There are numerous types of life insurances available and the one most suitable for you will depend on various factors. Decreasing term life is the best option for you. But your main focus must be to ensure that your family is not saddled with an interest mortgage in case you die. On the other hand, with decreasing term life, you only pay for the amount of coverage that you need. You can also protect your home with a decreasing term life policy that starts out with a payout of $150,000 if you take out an interest mortgage. The payout will diminish over the years as you pay off the mortgage loan.
The next tier of life insurance policy is called Level term. Similar to decreasing term life, Level term pays out a compensation if you pass away under the terms of the policy. However, your mortgage remains level instead of dropping when being paid off. Nonetheless, Level term life insurance is available from one to forty years and often comes with a range of options that can extend at an additional cost.
Knowing which type of life insurance you need and what different policies provide is very important. You should contact a financial adviser who can look at your circumstances and match the best policy to your needs if you have any doubts.