Did you know that gaining a better understanding of life insurance can help strengthen your overall financial wellness? Think about hitting the gym and being presented with a wide array of machines and equipment. What if you do not know how to properly use them let alone their purpose? Well, this is exactly how most people feel when it comes to life insurance. They just know they need it, but don’t know the kind of coverage they should settle for.

If you are one of those people, you don’t have to fret as in this post, we are going to discuss the five most important things to know before getting life coverage.

The Importance of Life Insurance

Many individuals tend to overlook the importance of life insurance in regard to financial planning. It is certainly not a popular topic in portfolio building or retirement income planning, but as you get into adulthood and take on family obligations, life insurance becomes vital in creating a comprehensive plan.

It is not always easy to think about the unexpected, but taking the necessary precautions has its fair share of advantages. Similar to staying healthy, ensuring your assets are protected with life insurance can alleviate future risk. For instance, if you have outstanding financial obligations and debts, the right coverage can help make sure that those burdens don’t fall on your loved ones after you die.

Beyond providing a death benefit, which is the primary use, life insurance can ideally come in handy for sophisticated planning. If you have a kid with a life-altering condition or special needs, death benefits can help secure their financial future without impacting your other children. The right policy can also cover any taxes left on your estate.

Ultimately, you want to be certain that your family members will be taken care of and life insurance is one of the best ways to gain that sense of comfort.

Types of Life Insurance

There are two basic types of life insurance policies that you need to comprehend- Permanent and Term policies. The latter covers you for a particular period to insure against unforeseen loss. Permanent life insurance policies, on the other hand, provide a death benefit but don’t end after a specific period. This form of insurance is designed to protect you for the whole of your life. Given that each form of coverage is distinct in terms of benefits and features, it’s advisable to consult a financial advisor as they can help you pick you a policy that matches your financial needs.

Your employer might also provide group insurance as part of your employee benefits. This can be an appealing perk, but the type and level of protection might not meet all of your requirements. Some employers offer a particular level of coverage at no cost, while others offer an extended portion that you can buy voluntarily.

Employer-provided coverage can be an excellent addition to your plan, but it’s imperative to assess your needs carefully and determine whether you really need additional coverage.

When To Purchase Life Insurance

Everyone’s life insurance plan varies based on their life stage and individual needs. You should consider getting the coverage as soon as you develop a need. Milestones, like getting married, buying your first house and getting children, are usually important times to consider getting life coverage. Since there’s generally no cash accumulation for term life insurance policies, the cost tends to be low. When you seem to have the most financial needs, term life insurance can be a great way to make sure your family is covered.

When you reach a stage with more complex financial planning needs, you should consider a permanent policy. Given that your policy’s cash value can grow income tax free and also be obtained tax free through withdrawals and loans, this plan can give you more options and greater flexibility. Such policies are best suited for passing on a business, funding a trust, donating to a charity or paying estate taxes.

Regardless of the policy, the earlier you begin planning, the better. Life insurance cost tends to increase each year because age, finances, and health are all factors that impact the total premium.

The Amount of Coverage You Need

According to research, over 50% of people do not purchase more insurance because they do not know how much to purchase and about 47% of them worry about making the wrong decision.

Of course, some coverage of even a modest amount like $50,000 is undoubtedly better than nothing, but it is always better to assess your individual needs. Again, a financial advisor can help determine the type of insurance and how much coverage makes the most sense for you and your family.

There is no one-size-fits-all model when it comes to such. Assets, dependents, risk tolerance, debts and income are all major factors to consider when determining how much coverage you need. There are also numerous online calculators that you can utilize as a starting point in order to determine your basic insurance needs.

Building Life Insurance Into Your Comprehensive Financial Plan

An ideal policy can go a long way in building a comprehensive financial plan. This can include securing retirement income, meeting your goals and ascertaining confidence and comfort for you and your loved ones. Unfortunately, most people put other financial priorities over this one. According to a survey conducted by Voya, about 45% of people are willing to give up their financial security if it meant keeping their cars, vacations, smartphones, etc.

Life insurance can be an invaluable tool for you and your loved ones and can play a vital role in your financial planning strategy. So, take some time and think about protecting your future. With the tips mentioned above, you should be able to settle on a policy that matches your needs and helps you meet your financial goals in the long term. Also, ensure you enlist the help of a financial advisor as they can really help in making the right decisions.