Family life insurance

A family life insurance policy can be tailored to your specific needs to help ensure that you are financially prepared in the event of an unexpected tragedy. Beneficiaries of a life insurance policy can receive a financial death benefit if a family member dies. Life insurance for families can take the form of term life policies, which last for a set period of time, or whole life policies, which never expire as long as premiums are paid.

If you're looking for family life insurance, this article can help you understand what it is, what you can expect from purchasing a policy, and why family insurance is or isn't right for you based on your financial goals. Life insurance coverage options, like homeowners or auto insurance, can be tailored to each individual's circumstances and financial goals. Learn how family life insurance plans work and how to find the right policy for you.

Why you should consider buying a family life insurance plan

If the unexpected happens, family life insurance may help to secure your family's financial future. The death benefit can be used to pay for expensive funeral expenses, but it can also be used to pay off major debts or replace income if one or more family members die.

Some families choose to purchase term life insurance, which covers you and your loved ones for a set period of time (usually 10 to 30 years) and may be less expensive. Term policies are intended to pay out a death benefit if you die during the coverage period. If you do not die within the specified time frame, your policy will usually expire and your beneficiaries will not receive a death benefit. Some life insurance companies, however, allow you to purchase a conversion rider, which allows you to convert a term policy to a permanent policy at the end of your term.

Permanent life insurance, on the other hand, remains active as long as premiums are paid. It is typically much more expensive than term life insurance and includes a cash value account that can earn interest and/or returns over the policy's term. You might be able to borrow against this money, pay your premiums with it, or withdraw it from your account.

Buying life insurance as a parent

When you're a parent, a life insurance policy provides financial security in the event that you or your spouse dies while you still have children or other dependents at home. When a working parent dies unexpectedly, it can help to replace income. Furthermore, if the parent who normally handles these tasks dies, the death benefit can help cover the cost of childcare, cooking, and cleaning. When determining how much life insurance you may require for each member of your family, consider the value of your income, debts, and other relevant expenses.

You may be considering which type of policy is best for you. The following policies are popular among parents.

• Term life insurance: Term life insurance is typically much less expensive than whole life insurance because the payout is not always guaranteed for the life of the policy. As a result, term policies may be an excellent choice for low-income families who only need life insurance coverage for a limited time, such as when their children are young and financial support is likely to be critical.
• Whole life insurance: Whole life insurance is typically much more expensive than term life insurance because it lasts your entire life and a payout is considered unavoidable. It also includes a cash value account that can earn interest and/or returns depending on whether you have a permanent or whole life insurance policy. Over the course of your life, you may be able to borrow from or withdraw funds from this account. Whole life insurance may be a good option for some families depending on their goals.
• Joint life insurance: First-to-die joint life insurance policies pay out the death benefit when the first spouse dies. This type of policy may be cheaper than purchasing two separate policies. The other option is a second-to-die policy, which pays out the benefit after both spouses pass away. Leaving an inheritance to your children in this way may be beneficial from a tax standpoint, since death benefits are usually free from income tax when they are paid out to the beneficiaries.

Joint life insurance policies

You may be wondering how joint life insurance policies work because they are a less commonly discussed type of life insurance. Joint life insurance is typically thought of as a type of permanent life insurance that lasts as long as the premiums are paid. It can be structured to build cash value and yield a tax-free death benefit while covering multiple people. However, similar to term life insurance, you may be able to purchase joint life insurance policies that expire after 20 or 30 years.

Joint life insurance policies are less common than individual insurance policies, but they may be appropriate for couples who expect to have some form of life insurance in place. In some cases, purchasing a joint policy is less expensive than purchasing separate policies for two people. The two types of joint life insurance are first-to-die life insurance, which pays out when the first of the two spouses dies, and second-to-die life insurance, which pays out when both spouses die. If you're not sure which type of joint life insurance policy is best for you, consult a life insurance guide or speak with a licensed life insurance agent.

Buying life insurance policies for children

Most families may not consider getting life insurance for their children on their own. After all, children typically do not contribute financially to the household and have a lower risk of death than older people. However, there are several reasons why life insurance for children may be beneficial. The first reason is to plan for an untimely death, in which case you could take out a small policy to cover final expenses.

Another reason is to lock in a low-cost whole-life premium at a young age, before any pre-existing conditions manifest. Developing health conditions may make it more difficult for a child to obtain their own insurance as a young or older adult. Instead, you could purchase a policy early and transfer it to your child when they reach the legal age of majority, which is typically 21 years old.

Can you buy life insurance for your parents?

While there are strict rules about who can purchase life insurance, you can buy life insurance for your parents to help cover any expenses they may leave behind. Purchasing life insurance for your parents can benefit them (and you) financially in a variety of ways. A death benefit, for example, can assist the surviving parent if they rely heavily on the other for retirement income or other benefits.

They could use an accelerated death benefit rider to access policy funds to pay for long-term care. If you are named the beneficiary of a standard life insurance policy, you will receive the benefit when the policyholder dies. If you act as a caregiver in their final years, this could help replace any lost income or expenses.

Frequently asked questions

What is not covered by life insurance?

Most standard life insurance policies do not cover certain circumstances. Deaths caused by war and suicide are two common reasons for someone's inability to receive the death benefit. Some policies also exclude deaths caused by an airplane accident. These are things to think about when reading the fine print on your policy.

What happens if you outlive your term life insurance policy?

If you do not die within the policy term, your policy will expire and your beneficiaries will not receive a death benefit. If you want to keep your coverage after the number of years specified in your term policy, you may be able to purchase a conversion rider, which allows you to convert to permanent insurance before the policy expires. Some companies will allow you to convert to a permanent policy while reducing your death benefit. Consult with your life insurance agent to confirm the specifics of your policy.

Who needs life insurance the most?

When you have dependents who rely on you, it may be in your best financial interest to prioritize getting family life insurance. This is true for both working and stay-at-home parents, because if you die, either your income or your role in the family may need to be replaced. Life insurance for elderly parents can help cover costly medical expenses and settle debts that your survivors may not be able to afford after you die.

If you have no dependents and no financial insecurity, a life insurance policy may not be worth the cost. You may also decide that your children do not require life insurance based on your financial situation. Instead, you may want to consider a tax-advantaged educational savings account as another way to save money for your children's future.

Can I get life insurance without completing a medical exam?

Many life insurance companies offer policies that do not require a medical exam; however, these policies may be more expensive than permanent or term life insurance policies that do. Why? A medical examination assists insurance companies in determining your risk level and calculating a premium based on that assessment. If you are in good health, an exam may assist you in obtaining a lower premium. Otherwise, a non-medical exam policy may be more expensive.

What is the best life insurance company?

The best life insurance company for you is determined by your personal needs and preferences, as well as your current health and other factors. First, you should decide what kind of life insurance policy you want. An independent insurance agent may then be able to assist you in locating companies that offer your desired policy type. Once you've determined which companies offer the best policies for you, you can compare third-party customer satisfaction scores from J.D. Power and financial strength scores from AM Best. It's best to see how companies compare.