If you are married and have children you should certainly have life insurance. While you might not want to dwell on your own mortality, the fact is that you could be killed in an auto accident or die of a heart attack tomorrow and how would that leave your family? If it’s clear that you would be leaving your wife and kids in dire straits, you really need to check into buying some life insurance.
Cash value or term?
The first decision you will have to make is whether to buy what’s called term life or cash value life insurance. What is the difference? The biggest difference is that with term life you are basically renting coverage. No matter how much money you pay for your insurance each month, you’ll get none of it back if you decide to cancel the policy. In fact, the only way the policy pays off is if you die.
In comparison, a cash value policy actually builds cash value over the years. Suppose, for example, you were to have a cash value policy for 10 years and then decide to surrender it because your children have grown and are no longer dependent on you. In this case, the insurance company will refund some of the money that you paid, depending on the number of years you had the policy and the amount you paid in premiums each year.
What’s the answer?
Which of these two alternatives would be best for you? While there is no definitive answer to this, most experts suggest that if you have young children, you should choose term life insurance because you can get higher coverage for less money. As an example of this, if you are 35 and in good health, you could probably buy a $500,000, 10-year, level term policy for about $300 a year. Or you could make it a 20-year, level-term policy for around $400 a year.
You might be able to save some money on your term insurance by buying two policies. If you have a child age 12 and one age 8, you might buy a 10-year, level-term policy to take the 12-year old through college, and a 20-year, level-term policy to cover the 8-year-old’s college expenses.
Get preliminary quotes
If you believe term life insurance would make the most sense, you can go online, fill out an application and get quotes from as many as five or six different companies. Do keep in mind that these are preliminary quotes. Once you choose a life insurance company, it will probably ask for more information and may require you to take a physical–usually done in your own home in the evening or on a Saturday. Once the company gets all of the information it requested and the results of your physical, it will then give you a firm quote. If you sign off on the quote, you will then receive your policy and payment instructions.
Meet with an agent
If you feel that a cash-value insurance policy would make more sense for you, you should really sit down with an agent for a face-to face discussion. There are several different kinds of cash value policies, each of which has its own provisions. You really need to discuss the policy with an agent to make sure you understand what it covers, how cash value is accrued, when the policy can be surrendered, and so forth – before you buy.