If you are young and plan to have a family in the future, you may also want to consider purchasing Life insurance now so that you can lock in a good rate.
Just because you don’t have dependents, does not mean that you don’t have responsibilities. For instance, you may be concerned with not being an economic burden to others if you die unexpectedly. You may also want to leave some money behind to close family, friends, or a special charity as a remembrance. In this case, you should purchase enough coverage to pay funeral and burial expenses, and outstanding debts and tax liabilities, so that the bulk of your estate goes to your family, friends, or selected charity.
Your insurance needs will vary greatly according to your financial assets and liabilities, income potential, and level of expenses.
Types of Life Insurance
While there are many different types of Life insurance policies, they generally fall into two categories – term and permanent.
Term Life insurance is the simplest form of Life insurance. It provides financial protection for a specific time, usually from one to 30 years. These policies are relatively inexpensive and are well suited for goals, such as insurance protection during the child-raising years or while paying off a mortgage. They provide a death benefit, but do not offer cash savings.
Purchasing Term Life insurance is like renting a home. It is a short-term solution. Monthly costs are usually lower, but you will not be building equity. Individuals who need insurance protection now, but have limited resources, may purchase term coverage and then switch to permanent protection. Others may view Term insurance as a cost-effective way to protect their family and still have money to put into other investments.
Permanent Life insurance (such as Universal Life, Variable Universal Life, and Whole Life) provides long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher. This type of insurance is good for long-range financial goals.
Purchasing permanent insurance is like buying a home instead of renting. You are taking care of long-term housing needs with a long-term solution. Your monthly costs may be higher than if you were to rent, but your payments will build equity over time. If you purchase Permanent insurance, your premiums will pay a death benefit and may also build cash value that can be accessed in the future.