Is Life Insurance worth the cost? Ultimately, that all depends on the situation. No one person’s scenario is the same as another’s. Writing off life insurance as an unnecessary cost is a bold statement with potentially devastating results. The question you might consider asking yourself is how much life insurance should I have and what type of insurance coverage do I need?
The referenced article discusses the pros and cons of various types of life insurance. In the most simplistic explanation, the cost of life insurance premiums is a direct function of the policy’s death benefit -- the higher the death benefit, the higher the premium. However, the premium of one type of policy for the same death benefit of another policy could be significantly lower or higher.
Basically, there are two types of life insurance coverage options 1) Term Life Coverage and 2) Permanent Life Coverage. The name of each simply defines what each policy can and will do. Term coverage is for a defined period such as 15, 20, or 30 years. Permanent is permanent; as long as all conditions of the policy contract are met (paying your premiums,) your beneficiaries will receive a death benefit.
Permanent Life coverage offers many benefits, some of which include tax-deferred growth of cash value, lifetime coverage, and flexible use of cash value, and sometimes flexible premiums. For Investment purposes and estate planning, permanent coverage has many great and flexible options as long as you pay the premiums. Generally, the cost of permanent insurance is higher than the cost of term life insurance.
Term life insurance is, most often, cheaper when compared to a permanent policy with the same death benefit. However, term policies do not build or have any cash value. They are designed for just pure coverage with a defined death benefit for the length of the term.
Choosing which type of insurance to use ultimately depends on your situation, goals, and needs. Finding out how much coverage you need also depends on your situation, goals, and needs. Some people have a significant need for life insurance coverage and others do not. Nonetheless, it is always wise to start a conversation with a trusted adviser to find out how much and what type of insurance coverage you should consider.