The fact is that life is unpredictable. While everyone does everything in their power to stay alive, healthy, and look after their children, we know that it can all end unexpectedly. If you're a family person, don't miss out on this safety tool.
The biggest Do of Life Insurance is simple: get it.
The biggest Don't? It's a bit more complex, but let's get to the overall meat of it: get a suitable policy.
Every family or individual has different circumstances and needs. We need to focus on what's your particular need and not what policy looks best on paper.
Insurance has two kinds you should know about:
Permanent and Term Insurance.
Permanent Insurance is a policy that will last your entire lifetime, while Term Insurance is for shorter periods - whether five years, ten, or twenty. Both of course have death benefits. However, the permanent one has the options of flexible premiums whereas Term doesn't.
In Term Insurance, your premiums are used to transfer risk if you die during the policy's term, say within the ten-year period of that term policy. The good part of this is that your premiums for that period will stay the same and not increase with your advancing age.
Permanent Insurance is designed to protect you for your whole life until you die, This increases the premiums year by year because there's a natural increase on the likelihood of your death as you age, hence the payout. However, these policies typically have a return on your investment and can be set aside to accrue in benefit.
The one factor never considered when purchasing insurance is TIME.
Moreover, it is an evidently important factor seeing as to how it can affect your insurance plans in the future.
A combination of permanent and term insurance is recommended. This is a good formula to remember when purchasing insurance:
10x annual income = Life Insurance
Therefore:
5x annual income = Permanent Insurance
5x annual income = Term Insurance
This figure becomes different when you have children:
15x annual income = Life Insurance
5x annual income = Permanent Insurance
10x annual income = Term Insurance
For recapping purposes, here are the differences between Permanent and Term Insurance:
Term Insurance | Permanent Insurance |
Cheaper | Expensive |
Fixed Period | Whole Life |
No investment return | Investment return |
No premium flexibility | Premium flexibility options |
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