When Should I Get Life Insurance?

Let’s be honest, life insurance isn’t the most exciting thing to think about, but it might be one of the most important. Let’s dive into what you need to know most about life insurance.

What is life insurance?

Life insurance is essentially a contract between you and your insurer where you pay premiums in exchange for a sum of your money to be paid to your beneficiaries upon your passing. It acts as a financial safety net for your loved ones. There are three main types of life insurance:

Term life insurance: Coverage for a set period such as 10, 20, and 30 years. If you pass away during that time, your beneficiaries receive the payout. It is usually more affordable than whole life insurance.
Whole life insurance: Covers you for your entire life and builds cash value. It is typically more expensive compared to term life. Cash value is like a built-in savings account. A portion of your premium goes into this account and grows over time, tax deferred. You can borrow from it, withdraw from it, or even use it to help pay your premiums later.
Universal life insurance: This coverage is also permanent but is more flexible than whole life. You can adjust your premium payments and sometimes even your death benefits. It also builds cash value which earns interest based on market rates or a fixed rate set by your insurer. It can be a good option for those who want lifelong coverage and flexibility.

How much does it cost?

Rates depend on multiple factors such as coverage amount and policy type. However, life insurance can be surprisingly affordable. For example, a 30-year-old could pay as little as $20-30 per month for a 20-year term policy with $500,000 in coverage. Whole life insurance typically costs more but it includes a unique savings component.