29. January 2018
Deciding which life insurance types to look at depends on each individual's specific need.
All life insurance does not fit everyone's situation.
Let us examine why a single person would buy life insurance.
What about a single parent, what kind of policy would fit this person?
Sometimes we tend to think only married people buy life coverage.
Why would we think this way? How about business people?
Why should these people consider life insurance policies?
You Choose Life Insurance Types
- Married People
Let us look at the needs of married people as this seems to be the main reason people buy life policies. Let us also examine the life insurance types they tend to be interested in.
You meet your soul mate and you decide to get married. You also have plans to have one or two children. Your partner and yourself work at jobs that yield a good income.
You both decide it would be wise to buy a home before you have children. As you proceed with that you become very aware that you need some life insurance in case one of you should die.
You want the home to be left free and clear.
The life insurance types that you look at are level term policies and decreasing term insurance. With the level term policy, the death benefit remains the same throughout the life of the policy.
With decreasing term, the face amount of the policy decreases as the balance of the mortgage decreases. You settle on the decreasing term policy as the premiums are cheaper.
You also become aware that as you plan on having children you will have a need for more coverage. You can buy it now as it costs less or you can buy more and more as the years go by, if you can qualify for it.
You decide to buy a term insurance policy sufficient to maintain the family at least until the youngest child graduates college. You feel a 20-year term policy would solve that problem.
You are also aware that your spouse may need to guarantee your income up until age 65, retirement age. One of the life insurance types you look at is probably a 30-year term policy or possibly term to age 65. In some cases, a universal life policy or a whole life policy would fit the bill.
- Single Parent
The needs of a single parent are similar in many ways to those of married people. These people have an even more urgent need as if this parent should die there will be no other parent to care for the children.
After taking the time to make the necessary arrangements for their care a single parent now has to look at life insurance types that would best fit their particular situation.
As this person has a need to be careful with money level term policies would more likely fit like a glove.
If the children are young the 20 years, 25 years or 30-year policies, in the right amount, should be sufficient to carry them through from infancy to the end of their college years. If they are older you may want to use a 10 year or 15-year term policy.
- Single Person
Does a single person need life insurance? Why? The only real life coverage needs a single person has is one that will provide sufficient cash to pay off outstanding debt, if any, and to pay funeral costs. It would probably be a good idea to use a 10-year term to do these things.
These people should keep in mind though that coverage is much cheaper to purchase at a young age.
It would be wise to buy a fairly larger amount of the type of policy that would be useful when they get older, that is if this person plans on marrying and having children sometime in the not too distant future. The types of life coverage types to consider here would be 20 year term or 30 year term policies.
- Business People
Life insurance is an important consideration for any type of business. A corporation or partnership would need life insurance on the lives of each shareholder or partner which the survivors would use to buy out the shares of a deceased shareholder.
Which life insurance types do these executives consider? Level term policies are usually used to fund this initially but they are usually converted to permanent policies later on that is if they intend to keep the business going for a long time.
Key man or key employee life insurance is very popular with most any business. You buy a policy on that employee whose absence may hurt the company.
You make certain that if this employee dies suddenly you have sufficient funds to tide you over until a suitable replacement is found. Long term level term insurance policies can be used for this.
Permanent insurance is sometimes used. This could provide a lump sum or additional income for this employee at the time of his or her retirement.