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Life insurance is not sexy. It’s not fun to talk about and it’s definitely not a process anyone enjoys. However, much like death and taxes, buying life insurance is an essential part of life and a crucial element of sound financial planning. Most everyone is aware that they need life insurance but, from my experience, most people procrastinate until there is an important life event that pushes them to buy it. However, there are some serious benefits to buying insurance early on, especially if you have debt, are married or planning on marriage, have or are planning on starting a family, or you are a business owner.
How Does Term Life Insurance Work? Term life insurance is quite simple—use it or lose it. In other words, you pay an annual premium (determined by the insurance company) for the “term” of the policy (usually 20 or 30 years) and if you die within those 20 or 30 years, your beneficiary will collect the specified amount indicated on the policy. For example, let’s assume you purchase a $1 million, 20-year term policy and the premium is $600/year. Assuming you are current on your premium payment, if you die within the 20-year period, your beneficiary will receive $1 million, tax-free.
How Does Whole Life Insurance Work? A whole life policy provides a set amount of coverage for your entire life. As long as the premiums are paid, your beneficiary will receive the benefit amount upon your death. Whole life policies also build up "cash value" from part of the premium being invested. It’s possible to access that cash value as the funds grow.
Whole life policies build up cash value slowly at first, but then pick up the pace after several years, when your earnings start to grow faster than your "mortality cost” (the cost of insuring you). At some point, the cash value may eventually earn enough that it could be used to continue to pay for your premiums until you die. Your insurer should be able to provide you with a policy illustration to demonstrate the potential growth of your policy.
Why Do You Need Life Insurance? One of the most fundamental questions you should ask yourself when contemplating life insurance is this: Will someone in my life be adversely effected (from a financial standpoint) by my untimely death? This is different from “Will someone be sad by my untimely death?” I will be sad. But I do not want to assume your financial liabilities.
How Much Insurance Do You Need? This is not an easy question to answer and everyone is different. First, it depends on the variables I mentioned above. It also depends on your age, your sex (men are generally more expensive to insure than women), and how much insurance you can afford. The general formula used by insurance agents is somewhere between 7-10 times your annual salary. For example, if you make $100,000/year, you should consider buying somewhere between $700,000 to $1,000,000 of insurance. That being said, if your life is complicated (kids, business, lots of debt), you should probably look to increase that amount. Again, consider seeking the advice of a financial advisor who understands your financials before making this decision.
Please click the button below and you will be re-directed to our safe and secure quoting site. You will be asked the following:
That's it! You will then be able to easily adjust the amount and type (Whole/Term) of life quotes. If you like what you see, please continue on to apply!