When you have dependents, your planning for their financial security must account for the unexpected, including your own death — unfortunately.
As gloomy as the thought of your family trying to survive without you and your income might be, having a decent life insurance policy in hand could give you as much peace of mind as you know they will be able to pay for their expenses and education.
But buying life insurance may seem complicated, especially with various types of life insurance policies and providers requiring comprehensive medical check-ups, many forms to complete, etc. If you are healthy and young, why should you bother? The answer is because crises, by definition, strike without warning signs.
Having life insurance is totally worth the initial hassle. And you probably will have to go through the process only once or twice because many life insurance policies are either permanent (don’t expire) or for a specified term, such as 10, 20 or 30 years, which will put your dependents at an age where they can be financially independent.
Rates and types
If you’re relatively young or in a good shape, and you complete the medical check-ups and lengthy health questionnaires, you’re likely to get and lock a good rate for the entire term of the policy, which is a great value and a good reason to think about life insurance early on in life.
So which type of policy should you choose? If you have young children or a lot of debt, you should go with an extended term insurance, which will give you a low rate and a large amount. But be aware that you won’t build equity in this insurance, meaning that if you live to see it expire, you won’t be getting paid anything at the end. But you can renew it into a new policy based on your age, health, etc, which probably will be at a much higher premium.
Alternatively, you can select a convertible term policy, which turns into a permanent policy when the term ends at a higher rate, without requiring you to go through medical check-ups, etc.
If you want to secure the future of your survivors regardless of their ages, go with a permanent life insurance policy, which probably will have a higher premium than a term policy, but will pay the beneficiaries the full amount regardless to when the claim is made. Explore the various types of permanent life policies to know what fits your needs and financial abilities.
Your employer may offer you a life insurance policy with the option to upgrade it to a higher value. This could be a good option if the rate you’re getting through your employer is much cheaper and easier than shopping independently, but keep two things in mind. First, your life insurance benefits probably will end if your employment ends. So in many cases, it doesn’t make sense to upgrade it.
Second, life insurance policies get more expensive as you get older. So even if you’re planning to stick with your employer for another five years or more, seeking your own independent life policy as soon as possible can save you a lot of money on the long run.
The best balance is to acquire life insurance as soon as possible independently. If you get additional benefits from your employer, these certainly won’t hurt in case of a crisis. Make sure you always keep your beneficiaries up to date to ensure an easy process for your survivors.
Where will you die? As mysterious as the answer could be, so is how your survivors will figure out a claim with an overseas insurance provider. Again, since the inevitable might happen at any time, you better work with a provider that has an excellent reputation of customer services and preferably representatives in places you could see yourself living in the future — like your home country if you’re an expatriate.
In addition, make sure that details of your life insurance are shared with your spouse or family, especially if your policy is overseas. The more details they have, the easier it will be for them to reach out and process a claim quicker.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Plan early to get best rates and terms
Know what you and your family need
Buy a policy independent of your employer
Pick a provider with excellent customer service record