4 common questions answered
Are you contemplating buying life insurance? Or wondering what plan is right for you? Life insurance provides peace of mind that your loved ones will be financially cared for, debts will be paid and expenses will be covered in the event that you die. But it’s not for everyone. And all plans aren’t the same.
If buying life insurance is on your list of things to go in the upcoming year, keep reading. We provide answers to four common questions about life insurance so you can make the best decision for yourself and those who depend on you.
- Do I need life insurance?
- What is the difference between term and whole life insurance?
- At what age should I get life insurance?
- How do I get a life insurance quote?
Question #1: Do I need life insurance?
Not everyone needs life insurance. Most plans are purchased to provide financial support (in the form of tax-free money) to a spouse or partner, child(ren) or aging parents after you die. These funds can be used to supplement your income, pay off debt and cover funeral expenses. If you don’t have dependents but want to ensure your debts are paid after you die, many banks and credit card companies offer options, often for just a few dollars a month, that pay your debt in full upon death.
A life insurance policy can also be used to fund a business, including paying debts and salaries, in the event a partner passes away. Or to benefit a charitable organization. If any of these situations apply to you, you may want to consider a life insurance policy.
Question #2: What is the difference between term and whole life insurance?
There are two main types of life insurance—term life and whole life. Which type of policy is best for you depends on many factors, including your financial situation, goals, age and health.
Term life insurance
Term life insurance provides a death benefit to named beneficiaries if the covered person dies during the term of the policy. There is no cash value and no payout once the policy expires. Premiums are determined by the policy holder’s age, health and life expectancy. Insurance companies can require a medical exam and inquire about risk factors like driving record, occupation and hobbies, as well current medications, smoking status and family history.
Term life is the less expensive option off the two. The average cost is about $26 per month. This type of coverage is especially appealing to younger people with small children or those who know they only need coverage for a specified period of time—for instance to provide a safety net during the life of a mortgage, while dependents are young or until a considerable nest egg can be established.
At Greater Alliance Credit Union, we make shopping for term life insurance easy. Qualify for up to $1 million in coverage with no medical exam or lab tests in most cases.
Whole life insurance
Whole life insurance, much like its name implies, provides coverage over your “whole” life as long as you continue to pay your premium. Premiums always remain the same and the death benefit never changes. The security and predictability of whole life make it the most commonly purchased type of life insurance in the United States, accounting for 60% of all policy sales.
Another benefit to whole life is that it accumulates a cash value in addition to providing a death benefit. That cash value can be used to pay premiums, borrow money at low rate of interest or supplement retirement income. Whole life, however, is more expensive than term life, costing as much as 5% to 15% more.
If estate planning or funding a trust are included in your long-term financial goals, or if the security and predictable nature of this type of policy appeals to you, whole life insurance may be a viable option. Greater Alliance Credit Union offers comprehensive whole life insurance plans —regardless of age, health or any other reason.
Question #3: At what age should I get life insurance?
The age to buy life insurance varies from person to person and depends on a number of factors including family obligations and financial situation. Best practice is to get life insurance when others start to depend on your income. Of course, the younger you are, the less expensive life insurance will be. Most people’s health declines with age, and although there are several other factors that determine the cost, age is a big one. So, the longer you wait, the more you’ll pay.
Questions #4: How do I get a life insurance quote?
At Greater Alliance Federal Credit Union, we believe buying life insurance should be simple and affordable. Let us help you explore life insurance options that fit your needs. Call 201-599-5500 or schedule an appointment today for a free quote.