If you have a spouse and young children, you will need a large amount of life insurance to support your children until they are no longer dependents. If both you and your spouse provide income, you should both take out life insurance in proportion to your income.
If have a spouse, but no dependent children, you’ll want enough insurance to provide for your spouse and cover burial costs & any debts you have. If you have no spouse and no children, life insurance can still cover burial costs and help distribute your estate.
There are 7 types of life insurance:
- Term: You pay for a policy over a certain period of time. If you do happen to die during that period, your family will receive benefits. This type of plan can transition to whole-life coverage without a mandatory physical.
- Renewable: The policy automatically renews every year. You don’t have to submit any new information or have physicals. This continues every year until you’re in your 70s, and the policy increases each year.
- Re-entry: You’ll have to take physicals periodically so the company can assess your rate of risk. If you don’t take the physicals, your premiums will go up.
- Level: Your premium will be locked at a certain rate for a certain time, however, not necessarily for the entire period of coverage.
- Decreasing: The face value of this policy decreases over time, but the premium remains the same.
- Whole Life: Cash value builds up, dividends may be offered, and death benefits are provided. The policy continues until death, does not need to be renewed, and coverage won’t be ended unless you fail to pay the premiums.
- Universal Life: This plan is like whole life coverage, but with more flexibility in cash value growth and how you pay premiums.
- Variable Universal: You choose the investments for your cash value. This is riskier but gives you more control.
- Variable Whole Life: Like the above, you control the investments made. Like Whole Life, you have less flexibility in cash value growth and methods of paying premiums.