Dealing with grief after the death of a loved one is a difficult and lengthy process. Having that grief compounded by the inability to cover debts, funeral expenses, mortgages, or even the daily cost of living can turn a bad situation into a family disaster. That’s why, if you have people depending on you financially, it’s time to buy life insurance.
You need to be able to ensure that your spouse, children, or relatives are at least able to carry on as they currently are in the event of your unplanned absence. Although money will never be able to take your place, it can help guarantee your loved ones won’t have to struggle.
WHO NEEDS A LIFE INSURANCE POLICY?
The strategy for purchasing life insurance differs depending on the situation of those applying for life insurance. Certain individuals might find they need a greater amount of coverage than others.
Some might be in urgent need of life insurance, whereas others could possibly go without any coverage at all. Each individual’s situation is unique to them, but there are some groups of people who should more seriously consider life insurance over others.
As a rule of thumb, only those with dependents really need to get a life insurance policy. Certain types of individuals, such as business owners, can also benefit from life insurance in order to guarantee business continuity.
Those who would benefit the most from buying a life insurance policy may fall into the following categories:
Head of Household
Heads of households are typically seen as the ideal candidates for life insurance; single heads of households even more so. In their case, the money from a life insurance policy functions as a temporary replacement for their income if they pass away.
This allows the surviving family members to maintain their lifestyle, usually until the children finish their education and are financially independent.
Term life insurance plans are particularly relevant to this scenario. Term life lasts for a predetermined amount of time and may not be necessary once the retirement age is reached. By then, most children won’t depend on their parents for money.
Although term life insurance grows considerably more expensive after the age of 50, it is also considerably less expensive than whole life insurance. The lower cost helps cover the multiple expenses of running a family.
Parents of a Child with Special Needs
While certain individuals with special needs are eventually capable of maintaining employment and housing, not all are so fortunate. For their parents, financial planning needs to not only extend through their lives but also that of their children.
Raising a child with special needs can be very expensive. Because of this, term life insurance is often considered by parents, as it is the most inexpensive way to insure themselves. While it is a good choice for the short-term, do consider that it is quite possible for the parent to outlive the term of the policy. Keeping a term policy after its level premium ends is also increasingly more expensive.
On the other hand, permanent whole life insurance plans guarantee payout, which can help ensure that the dependents will be able to support themselves without cause for concern. Whole life can provide peace of mind for parents as it will always provide funds to their children no matter when they pass away.
Stay-At-Home Parents
A common misconception is that only the breadwinner of a family should get a life insurance policy. Stay-at-home parents usually don’t have a stable source of income and therefore many people believe they do not need life insurance.
However, think for a moment about just how much stay-at-home parents do to keep their kids’ lives and their households running. More than just caretakers, stay-at-home parents often act as tutors, cooks, housekeepers, and more 365 days a year.
All of this work carries great value and can cost the surviving parent tens of thousands of dollars a year to replace in the event of their counterpart’s unfortunate passing.
Just like for heads of households, a term life insurance policy is typically the best choice for stay-at-home parents. By getting life insurance for a specific duration of time, you are able to obtain coverage until the children have grown and become financially independent, while also keeping premiums low.
Although a stay-at-home parent can never truly be replaced, life insurance can help survivors cope with their passing by helping finance the cost of outsourcing many services.
Divorced Parents
The process of filing for and completing a divorce can be extremely stressful or relatively seamless depending on the parties involved. Life insurance is one topic that many couples may overlook between the paperwork and discussion of settlements.
If one or both of the parents getting the divorce have purchased a life insurance policy, it is in their best interest to keep that policy in order. By doing so, they can protect the financial interests of any their dependent children—and of both parties.
Often, divorces require the noncustodial parent to maintain or purchase a life insurance policy, term or permanent, for the benefit of any children who are still minors. This is a part of the child support that many noncustodial parents are asked to provide after a divorce.
Ultimately, we recommend term life policies for divorcees who are asked to buy a new policy. A term policy should be able to cover the period of time during which the children remain minors and without emptying your pockets.
Wealthy Individuals
When those of significant wealth pass away, their heirs may become subject to estate and inheritance taxation. The proceeds of life insurance, however, are tax-free to the beneficiary.
High net-worth individuals may ultimately decide to invest in life insurance in order to pass on their proceeds to inheritors or charities without incurring in any taxes. Permanent whole life insurance plans may be utilized to excellent effect here, as they can assist beneficiaries in affording the aforementioned taxes.
Business Owners
Business owners, especially those without a family or any dependents to speak of, may wonder why they could possibly need life insurance. Life insurance for small business owners is an essential part of planning for your company’s future, though.
Say, for example, that an owner, partner, or key employee of your company dies. Life insurance can ensure that your business continues and, in the case of those with families, that your dependents won’t face a disaster.
Business owners should consider both whole life and term life insurance alternatives. On one hand, whole life assures that the business and the business owner’s family will be protected for their whole lives.
On the other hand, term life policies are much more affordable and a good option for business owners with partners who may be retiring at a certain date in the future.
Homeowners with a Mortgage
Just as heads of households use term life insurance as a means of income replacement, so do homeowners with mortgages.
If their beneficiaries are ill-equipped to afford mortgage payments, then a life insurance payout will provide a financial buffer, thus allowing them to remain in the family home.
Someone with Co-signed Debt
Life insurance is necessary for those with co-signed debt in order to release the surviving party from any further obligations to their loan. Proceeds of a life insurance policy can be used to pay off any debts one co-signed with, for example, a student.
By getting life insurance, you make sure that the surviving party is not left with massive debt and no way to pay it back. A term life policy that mirrors the projected pay date of the loan is a good idea for this type of consumer.
Those Who Want Final Cost Coverage
Oftentimes, permanent life insurance plans are great for those who do not wish their families to pay out-of-pocket on their funeral expenses.
With an insurance policy designed for final medical payments and funeral arrangements, those covered can live out their final days with a certain peace-of-mind, knowing that everything will be handled as they desire.
Those Who Want to Leave an Inheritance
Sometimes, regardless of their financial situation, people want to leave a small amount of money to their beneficiaries once they die.
Permanent life insurance, which lasts until the insured's death, will guarantee that some amount makes it to their loved ones.
HOW TO CHOOSE THE RIGHT PROVIDER
The process of buying life insurance can be intimidating and complicated.
This is mainly due to the traditional structure of the business sector as a whole. At ConsumersAdvocate.org, we’ve evaluated traditional and newer life insurance providers alike by five factors.
- The options offered for coverage and premiums
- A given institution's financial reputation, as assessed by trusted outside sources
- Policy features offered
- Types of plans offered
- Plan rider options
From rock solid, stalwart American icons like State Farm and New York Life to relatively new, Internet-based comparisons services like PolicyGenius and SelectQuote Life, there are more options than ever for buying life insurance policies.
With that in mind, we've reviewed every company and compiled the results into a list of the top 10 life insurance providers in the industry.