Generally, the questions to ask yourself before buying life insurance are: Will there be a financial hardship for your loved ones if you pass away? Do you have a spouse, partner or child depending on your income? Did you buy a home with a spouse or partner that is based on two incomes?
If you do have a need for life insurance beyond just fear that the pandemic may affect you and your family, here’s a look at what you should know about this type of protection before you dive into any purchase.
Term life insurance
Covers you for a specific period of time, typically 10, 20 or 30 years. If you die while the policy is in place, you’re covered. Once the term expires, you’re no longer covered. Term life insurance is best for those who may only need coverage during a certain period of time, such as when you’re raising kids or paying off your mortgage. Or for those who want some coverage, but don’t want to pay a lot for it.
Permanent life insurance
Which includes universal life, variable life and whole life — covers you throughout your life. Unlike term life, which is pure insurance that simply offers a payout if you die, permanent policies essentially create a savings account where you can earn a minimum guaranteed interest or a dividend. These earnings are generally tax-deferred and referred to as the “cash value.”
Whatever plan you decide to buy, make sure it covers your needs and budget as well.