When did you first start thinking about long term finances for your family?
Let’s face it, it’s awkward to think about wills, estate planning, and life insurance. I’ve always been a saver though. Early on, my parents emphasized the importance of saving money not only to provide for future purchases, but also to create a good nest egg in case of emergencies.
But it’s not enough to just put money in savings account anymore (anyway rates in typical money market accounts are horrendous). When I was pregnant with my first child, my husband and I knew we wanted to create a will and also get life insurance for parents. We wanted to provide for our kids in the best way possible, even if we were not around.
Any family has to consider the following when choosing a life insurance plan:
1.How does your background and health effect pricing
Your background, specifically your health background, will definitely impact your life insurance premium. Your job, profession, and lifestyle (e.g. smoking and drinking) will be assessed. Factors such as your weight, blood pressure, and your own as well as family history will certainly be considered. My husband’s premium was much higher than mine because of both his own health history as well as family medical history.
2.What type of life insurance do you want
Life insurance can be complicated. Coverage broadly falls into these categories (this was a good primer):
– Term life insurance – lasts for a specific term (e.g. 20 years, 30 years, etc.). This is the least expensive form of life insurance, but once it’s over there is no cash value or coverage.
– Whole life insurance – insurance that is almost an investment as the cash value of the payout will increase over time enabling the policy holder to receive more money than he pays for his premiums
– Universal life insurance – cash value account which earns at least 2% interest per year, costs rise over time
– Variable universal life insurance – similar to universal life insurance, but cash is usually invested in mutual funds with no guaranteed returns
3. When do you want to purchase it
Most 25 year olds don’t own life insurance. But more 45 year olds will own life insurance. If you have financial dependents, it’s a good idea to get insurance. The cash value may vary as well depending on the type of insurance (see above). This was a good guide on the best age to get insurance. But, for us, we just knew we wanted to get life insurance as soon as we had kids.
4. How much do you want to spend on insurance?
How much are you willing to spend on insurance? This answer is totally up to you. The factors effecting pricing depend on the factors above – your age, health, and location. Check out a simple insurance calculator to estimate your costs. I knew I wasn’t willing to spend as much as my husband on life insurance because of my relatively healthy background. I took this into account and was happy when I found a suitable plan within my budget.
Once we figured out answers to the questions above, it was easy to chose our life insurance plans. We ended up choosing term insurance plans because we have other higher interest earning accounts and we would have the flexibility of choosing a different plan later.
I still have a few fashion posts that have been pending forever, but want to put in a few practical posts and a few gluten free posts too!
