It is often said that “The only thing certain in life is uncertainty.” While many of us would agree to this truism, it doesn’t diminish our anxiety over the many ‘what ifs’ in life. Good thing, there’s life insurance. This financial tool provides your loved ones the security they need should anything untoward happen to you. Upon your death, your family will immediately receive the policy pay out helping them tide through whatever expenses need to be met – loans, childcare, college expenses, medical bills. What’s more, your beneficiaries will not be burdened with taxes as death benefit payouts are usually not taxable.
Living benefits
Apart from death benefits, life insurance also offers “living benefits”. You can access these while you’re still alive. You can use these to cover your medical expenses, secure a loan, pay off your debts, or even supplement your retirement savings. Find out what type of life insurance suits your needs and your budget. Know the points to consider before you purchase one for yourself or your loved one.
Key considerations
Before you buy a life insurance policy, it would be good to ask yourself these questions:
1. Do I need life insurance coverage?
The answer is “yes, you need one” if any of the following conditions is true:
- If someone depends on you financially and would need financial help when you pass on.
- If you want to cover your funeral and burial expenses so that your inheritance remains intact
- If your estate won’t have enough cash, investment, or any salable items to cover its taxes and debt.
2. How much life insurance coverage do I need?
Some experts suggest that your life insurance coverage should be at least 10 to 15 times your annual income. Others follow the DIME method. DIME stands for Debt, Income, Mortgage, Expenses. Simply add your existing debts, your annual income (multiplied by the estimated number of years your dependents will live off on it), your mortgage balance and the estimated education costs of your children. The sum should give you an idea how much coverage you need.
3. What financial goals do I want my life insurance to achieve?
The primary goal of buying life insurance is to provide a financial safety net for the loved ones you leave behind when you die. However, with a permanent life policy you can accumulate savings which in turn can be used for your other financial goals – fund your child’s education, supplement your retirement income, pay off mortgage or create an emergency fund.
4. What types of life insurance can I choose from?
If you want insurance coverage for a specific period (typically 10 to 30 years), term life would be a good option. But if you want longer coverage until your death while building cash values that you can use even before death, then a permanent life policy would be ideal. If you opt for permanent life, you can choose between whole life and universal life. Both offer cash values. The difference is whole life has a fixed premium and a fixed cash value growth. While universal life insurance offers you the flexibility to adjust premium payments and higher return potential.
Get expert advise
Still unsure what insurance policy to purchase? Get expert advice from someone who understands your concerns and can give you the big picture. Call our customer reps at Mercado Global and they’ll guide you on your journey to securing your future and your family’s — with less ‘what ifs’ and more ‘why not?’.
