Choosing the right type and amount of life insurance in Colorado can be difficult, but an independent insurance agent can help.
Table of Contents
What Is Life Insurance?
Life insurance is a type of insurance policy that provides a payout to your family or other beneficiaries after your death. When you buy life insurance in Colorado, you’ll pay monthly or yearly premiums, and your beneficiaries will receive a death benefit. Death benefits generally aren’t taxed, so your beneficiaries will receive the entire amount. Depending on the type of coverage you choose, your loved ones may only receive a payout if you die during the term of the policy.
Most life insurance policies cover common causes of death, including illness, natural causes, accidents, and being the victim of a crime. It’s also a good idea to make sure that you’re aware of exclusions in your policy, which can prevent your loved ones from receiving a payout. Common exclusions are death while committing a crime or while participating in a risky activity like skydiving.
Buying individual life insurance is a good way to ensure that you have coverage even if you change jobs. However, some employers offer group policies. If you’re a business owner, offering a life insurance plan can be a good way to attract and retain employees.
What Are the Different Types of Life Insurance?
The two major types of life insurance. In general, term life insurance is a straightforward insurance policy, while permanent life insurance combines life insurance with wealth-building.
A term life insurance policy provides coverage for a set time period, often 10, 20, or 30 years. Your loved ones will only receive a death benefit if you die within the policy term. Since these policies don’t need to pay benefits to every policyholder, they’re able to offer both more coverage and smaller premiums. Term life insurance can be a great option if you need coverage while you’re working but not after you retire, you plan to pay off your mortgage or other large debts during the policy term, or you want to pay for your child’s future education.
Whole life insurance is a type of permanent coverage, which means your beneficiaries will receive a payout whenever you die. While the premiums are significantly more expensive than those for term life policies, whole life insurance builds cash value and guarantees a payout. You have the option to withdraw or borrow from the policy, and you may be able to use the interest the cash value earns to pay for your premiums after you’ve had the policy for a while. If you want to ensure that you have coverage for your entire lifetime, whole life insurance can be a good option. This can be the case if you have long-term dependents like special needs children or you expect to owe a significant amount in estate taxes. Other types of permanent life insurance, life universal life, tend to be more flexible than whole life insurance.
How Do I Determine What I Need?
Determining the amount of life insurance coverage you need can be complicated. To get an idea, start by thinking about your financial obligations and who relies on your income. Then, think more specifically about your goals for life insurance and how you expect your death benefit to be used. You should also be realistic about the premiums you can afford. Whole life coverage can be the right option for some people, but the premiums are much more expensive than a term life policy that provides a comparable payout.
Depending on your situation, there are several good approaches to life insurance. You may want enough coverage to replace your income for several years, to pay for your children’s college tuition, or simply to cover your funeral expenses. If you and your spouse both work and need both incomes to pay your mortgage, you both probably need life insurance to cover the payments. Even though they don’t have an income, stay-at-home parents of young children should have coverage for the childcare expenses their spouse would need to cover in case of the stay-at-home parent’s death.
Once you’ve identified your main reasons for buying life insurance, think about whether those reasons will still apply in 15 or 30 years. If you’re at the beginning of your career and have young children, you’ll probably prioritize getting the most coverage for the lowest premium now. Since those children should be financially independent in a few decades, term life coverage can be a good choice. If you have a special needs child who will need financial support regardless of when you die, a whole life policy can provide those funds.
How Do I Know Which Policy to Choose?
Life insurance can keep your family financially stable after a tragedy, so it’s important to find the right coverage. When it’s time to choose a policy, working with an independent insurance agency in Colorado will give you expert advice and a wide range of options. Independent agents aren’t tied to a specific insurance company, so they can help you compare quotes from multiple insurers to find the best rates. They have the flexibility and industry knowledge to direct you toward the best options for you, so if a certain company isn’t a good fit, your agent won’t feel the need to recommend its policies. Shopping for insurance on your own can be difficult. An independent agent will make sure you understand the different policies you’re considering so you can make fair and accurate comparisons.