Post by Sasha
I’m a late 20-something married to an early 30-something, and we have a toddler-ish kid. Our lives, divided between work and play, are for the most part prescribed by the responsibility of family. My husband and I make decisions together, plan for the future and raise a very happy little boy.
Outside of our little unit, however, life is not so certain. We are worried about losing our jobs and how, subsequently, we will pay for things like a mortgage and health care. We worry about our financial security. We worry about what we will be able to leave to our son when we are gone, and what kind of world he will inherit.
Some of that is out of our control. But it’s also occurred to us that, as we now have a child, we need life insurance. We need some guarantees.
As life insurance rates are less expensive when you are young, it made sense to look into policies early. A life insurance policy could mean that both short-term expenses (funerals, medical bills) as well as long-term expenses (mortgages, car payments, student loans) will be taken care of.
There are generally three types of policies out there and different considerations with each one.
- Universal Life Insurance: A flexible policy that you can structure around your needs and your monthly income. You can adjust the premiums paid per month if your income varies over time as long as you pay enough to keep the policy valid and in effect. There may be a death benefit option that can either increase or reduce the death benefit as needed. This is especially useful if you have young children and want certain levels for lengthy periods of time, but then want to be able to reduce the benefit when your children are grown.
- Term Life Insurance: This kind of policy will maintain a certain premium for a distinct time period, after which you can opt to continue coverage with a premium that increases annually. You might decide that you want life insurance for 15 years with guarantees that your premiums will remain fixed. If you have a fixed budget, this might be especially useful.
- Whole Life Insurance: This offers a guarantee on the death benefit and guaranteed cash value for a guaranteed premium. This is often most expensive kind of life insurance, but may pay dividends (refunds of unneeded premium) that can be used in a variety of ways.
Furthermore, life insurance doesn’t mean that you’re taking an enormous bite out of your income now to plan for some distant future. Think about how much insurance you may actually need, don’t buy more or less. Think about your monthly expenses and look for opportunities to save a couple of dollars every month. The little things can add up. Making one cup of coffee at home per week instead of buying that latte could save up to $16.00 a month. Making your own lunch once a week rather than eating out could save about $40.00 a month. That’s $56.00 a month that could go to life insurance coverage.
Learn about the types of policies that are available and then work with an agent to structure the best plan for you.