The Ultimate Life Insurance Planning Guide

March 26, 2024

Demystify life insurance planning with guidance on policy types and maximizing benefits for your family’s future security.

A piece of paper in a hand that says "life insurance"

For many of us, caring for our loved ones and dependents is the most important thing in life. If something were to happen to us, we want to believe that our loved ones would be cared for in our absence. This is why many people take out life insurance policies: so that when we pass, we will leave resources for the people who matter to us the most.

Life insurance policies are surprisingly flexible and can work in many different ways to meet your goals for your family and circumstances. If you want a life insurance policy, it’s important to understand the differences between these types of policies, to know your own goals, and to work with an insurance agent who can help you navigate the many options. This life insurance planning guide can help.

Understanding the Importance of Life Insurance Planning

In the event of your death, your life insurance policy may be used in different ways. Some examples: you may want your life insurance to cover your loved one’s living expenses for a time following your death, giving them space to mourn and settle into the new norm. Or, you may intend your life insurance to pay off your home so your loved ones can live in your house affordably. Still, other life insurance policies can be used to pay for your funeral expenses, so your loved ones won’t have to.

Because there are different types of life insurance that can be used for different purposes, it’s important to engage in life insurance planning. This allows you to get what you want out of your policy, and to find something within your budget.

Types of Life Insurance Policies: Which One is Right for You?

There are several different types of life insurance policies. Generally speaking, life insurance can be divided into two different groups: term and permanent. Term life insurance only pays out during the time the policy is active. Term insurance typically lasts for ten, twenty, or thirty years, depending on your needs. Permanent life insurance pays out no matter when you die, as long as the premiums are paid. Permanent life insurance can be divided into various subgroups.

Here is a breakdown of some of the most common types of life insurance:

Term. Term insurance is often a policy of choice for adults (often younger) who want to ensure that their family will have money for living expenses in the event of their death. Often, customers wanting term insurance will choose a policy that will end when their children are older and more capable of caring for themselves. Term insurance is often the cheapest type of life insurance.

Whole. Whole life insurance is a straightforward permanent policy that pays out a guaranteed return on your death, provided that you have kept up with the premiums. This type of life insurance can be more expensive but is a very straightforward option for those who simply want to leave something for their beneficiaries, no matter when they die.

Universal. Universal life insurance has variable premiums that can be adjusted over time, but the amounts typically increase over time. Universal life insurance is usually tied to a stock or bond and the pay-out amounts are not guaranteed.

Burial. Burial life insurance pays out a small amount upon your death. This is intended to cover the cost of your funeral and potentially small medical bills that you leave behind.

Factors to Consider When Choosing a Life Insurance Policy

When you’re trying to choose a policy, know your budget and how much you can afford to pay in monthly premiums. It’s also important to know your goals. What is the money intended to cover? Who are your beneficiaries?

Finally, it’s also important to remember that some life insurance policies offer riders that allow you to access a portion of your death benefit while you’re still living. Some policies allow you to stop making payments under certain circumstances. If these features are important to you, work with your insurance agent to find a policy that matches your needs.

Creating a Life Insurance Plan: Step-by-Step Guide

Finding the right policy can take time. Here are the typical steps:

  1. Know your goals and budget. Work with your family (spouse or partner) to determine what you hope to accomplish by getting a life insurance policy, and what you can afford.
  2. Contact an insurance agent. Find an insurance agent you trust to help you navigate the many options available.
  3. Research the companies. Your insurance agent will help you find a policy with a company you can trust, but remember that you’ll need this company to be around for many years. Know the company’s financial strength and customer satisfaction before selecting the policy you want.

Tips for Maximizing the Benefits of Life Insurance

One of the best ways to maximize your benefits with your life insurance policy is to work with an independent insurance agent who will help you find a policy that meets your needs. Your independent insurance agent can also educate you on the ways that your policy works so that you can get the most out of it.

Once an insurance policy is selected, keep your beneficiaries up to date on the status of the policy, so they know what to expect in the event of your death.

Have questions? Work with an independent insurance agent to be your life insurance planning guide through the process. Work together to find the best policy. With help from an expert, you can rest assured that your loved ones will get the help they need when you’re gone.

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