7 Things to Think About When Considering a Washington Life Insurance Policy
You’re a Washington resident who instinctively knows that a life insurance policy is a smart investment decision, but that’s about all you know about the topic. In fact, you’re not even sure what questions you need to have answered before signing an agreement.
That’s where we come in. These seven questions offer a good starting point for those who are ready to get the ball rolling with life insurance. Use them to gain the barebone facts and to start the conversation about a Washington life insurance policy with your independent insurance agent.
1. What is Life Insurance?
A Washington life insurance policy is a type of contract that provides a financial payout to one or more of your designated beneficiaries upon your death. That might be a spouse, your underage or adult children, or other loved ones. You can change your beneficiaries at any point while your coverage is in force.
There are two basic types of life insurance:
Whole Life－This coverage protects you from the point you sign your policy to the end of your life, as long as you continue to make your premium payments. Therefore, the death benefit is guaranteed for as long as the policy stays in force.
Term Life－This coverage type offers financial protection for a designated period of time. This “term” of coverage might be when your children are young and dependent or when you start a business or work for a company – or for any other reason you might have. Only if you die during this designated period will a payout be made to your beneficiaries.
As you might have figured out, term life costs less than whole life since there’s no guarantee of a payout. If you take out a ten-year term policy when you’re 30 and healthy, the insurance underwriters are likely to believe that there’s a strong probability that you’ll still be alive by the end of that term, and no payout will have to be made.
Therefore, such a policy is likely to be very affordable as a result of the low risk. But your family will be protected in the unlikely event of you losing your life during this period.
2. What Does Life Insurance Cost and What Can You Afford?
Most likely, it will vary somewhere between $20 and $150 per month. It’s a hard question to answer because there are so many variables when it comes to life insurance, including what kind of life insurance you want, your age, your health, and the payout amount you purchase. The short answer is that the cost will become much easier to understand when you have answers to all of the questions that follow.
If you’d like a rule of thumb, it’s that you should carry a life insurance policy with a payout amount, also known as face value, of five to ten times your annual salary. But other factors include what you can realistically afford and the needs of your beneficiaries.
Keep in mind that whatever you and your insurance agent settle upon today, your premium will become cheaper over time. That’s because, while you’re likely to make much more money over the years and decades through raises, job promotions, and cost of living adjustments, your premiums will stay the same. So however costly your coverage seems now, it will probably end up being ridiculously affordable as the years go on.
3. What are Your Goals?
In short, why are you considering life insurance? This is where you start to look deeper into the relative benefits of term life and whole life policies. If you’re starting a business, maybe your partners insist on term life coverage during the first ten years while your business is getting on its feet. That might protect the company until others can become as knowledgeable as you, making it less likely that the business will fail if something should happen to you.
Maybe you have young kids and want to get them through the college years. Or you want to make sure they—and your grandkids—have an inheritance when you’re gone.
These are all very different life goals and will involve the consideration of different types of policies and face values. Your insurance agent will be able to help you organize your thoughts and make a decision.
4. What are the Needs of Your Beneficiaries?
Of course, the first step here is to determine who your beneficiaries are. They might change over time. For instance, if a spouse dies or you remarry, you’ll likely need to make a change. New births and new or ended relationships can also necessitate additions or deletions.
Now consider your beneficiaries’ needs. For instance, you might want to leave a generous death benefit to a spouse who is unskilled or has been out of the workforce for a significant period of time. But if your spouse is highly educated and commands a six-figure salary, your financial responsibilities toward them might be significantly lower.
Is your goal to protect your underage children through the school years and college? Or would you prefer to leave them a sizable inheritance no matter how old or successful they are at your time of death?
If your beneficiaries or their circumstances change over time, you can always purchase additional life insurance coverage to better meet those needs.
5. What is Your Age and Health Condition?
This is a very important cost component. Policyholders who are young and in good health pay less for life insurance simply because underwriters determine that the probability is high that the holders will live long and be able to make premium payments over a longer period of time.
The reverse of this, of course, is that older policyholders with serious health concerns will either be forced to pay much stiffer premiums or won’t be offered coverage at all. Smokers and those with other lifestyle risks or dangerous hobbies or vocations might also be classified as higher risks.
If you’re in your twenties, you might not have given much thought to your own mortality. You might not even have a family and no one on the horizon. But don’t let that stop you from getting life insurance coverage. You might well find that the rates you’re quoted are cheaper now than they’ll ever be.
It should be noted that age alone won’t, in all probability, keep you from getting an affordable life insurance policy. Never assume anything. Instead, consult with your life insurance agent no matter your age or health condition. Coverage might be more available than you thought.
6. How Does Your Life Ensurance Policy Fit Within Your Estate Planning?
The real question here is, what do you intend to leave your loved ones? And how much of that planning is centered around the proceeds of your life insurance policy?
If you have significant investments, a well-funded retirement plan, and personal real estate that can be turned into liquid assets, you might not need as much life insurance as you might need if that’s basically all you plan to leave your beneficiaries.
Of course, all of this might be far into your future if you buy your life insurance policy when you’re younger. But if you’re older, you might have a clearer outlook on your finances and a better idea of how much life insurance you should buy.
7. What is the Investment Potential of Your Life Insurance Policy?
This is actually a highly technical series of questions to ask your insurance agent. There are some instances in which you can use your Washington life insurance policy as an investment tool.
That doesn’t always mean that it’s a prudent move, though. But you should at least know that many whole life policies build cash value over time that you can borrow against, if necessary.
Term life policies, on the other hand, don’t build cash value that can be borrowed against. While it might not necessarily be advisable to borrow against or even cash in a policy, it might be nice to know what’s possible, depending on the type of coverage you have.
There are even circumstances where your whole life policy will pay out while you’re still alive. This is likely to be if you have a serious or terminal illness.
The real point is the investment potential of your Washington life insurance policy (and whether or when you should access it) is just one more in-depth conversation you need to have with your life insurance agent.
Find Affordable Life Insurance in Washington Today
You’ve got a lot to think about. Your Washington life insurance policy might play a critical role in the financial security of your family, or other loved ones. That’s why you want to have a serious conversation with a trusted independent life insurance agent.
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