AARP on life insurance

Types of Life Insurance When you buy life insurance, you pay premiums to an insurance company. In return, the company agrees to pay a death benefit to your spouse, children or other beneficiary you choose. Many companies can provide this protection at an affordable cost, regardless of age. Once you decide you want life insurance, you’ll need to determine which type of insurance is right for you. There are two broad categories – term and permanent. Term life coverage lasts for a set period of years. Permanent life can last as long as you live. See the chart below for a comparison of the relative benefits of these two types of life insurance. Term Life Insurance Whole Life Insurance Designed for short-term needs Designed for long-term needs Lower initial rates that increase in set intervals Higher initial rates that stay consistent as you get older Coverage ends after a set period of time and does not build cash value Coverage can last for life and builds cash value Term life insurance is a way to get the most coverage for lower premiums now, with the understanding that rates will go up as you age. Permanent life can provide premiums that won’t go up due to your age, plus builds cash value that accumulates over time and can be borrowed against. Begin by looking at the resources your beneficiary already has – like savings, Social Security, a pension or other insurance policies. Then think about expenses they may face. For example, funeral costs, medical bills you may leave behind, rent and utilities, as well as, the ongoing costs of maintaining their lifestyle. This will help you determine the right amount of coverage you need. If you have already purchased life insurance, consider the effects of inflation and reevaluate if the coverage amount is enough. You'd need $1.40 in 2013 to equal the buying power of $1.00 in 1999, so what seemed like plenty of coverage back then may not be enough now. Also think about whether your needs have changed, particularly if it's been many years since you looked at your insurance needs. SOURCE: http://www.bls.gov/data/inflation_calculator.htm Helping loved ones cope with immediate expenses is the first thing that most people think about when purchasing life insurance. But you can also use life insurance to help secure your family’s future. Even a relatively small amount of life insurance may be enough to help with the down payment on a house or simply start a savings fund for someone you care about. Once you decide the type and amount of life insurance coverage you need, it’s important to choose a life insurance company that you can trust. Look for a stable company with strong financial ratings from top independent rating services, such as A.M. Best, Fitch, Standard & Poor’s, and Moody’s Investors Service. This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial, or accounting advice. Please consult your own professional for advice specific to your circumstances.