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Covering the Cost of Dying as published in InsideNova.com

For better or worse, “until death do you part” doesn’t apply to a family’s living expenses, which continue even if your major bread winner passes away. Of course nobody wants to leave their family accidentally impoverished, so proper life insurance is an imperative for most working families.

But what qualifies as “proper” for you and yours?

Life insurance is a contract between you and an insurance company. You agree to pay a periodic premium; they agree to pay your beneficiaries a lump sum if you die before the contract lapses. Your beneficiaries can then position the payout to replace the income stream you would have provided, had you not died.

There are two main types of life insurance: term and permanent.

Term insurance lapses at the end of a term, such as 20 years. It aligns nicely and relatively affordably with the fact that most of us eventually no longer need the coverage – such as once the kids are grown and you’ve retired. There are 5-, 10-, 20- and 30-year term policies offering premiums that never change (level premium) or that start out cheaper and rise over time (annual renewable).

Permanent insurance has no term. As long as you continue to meet your premium payments, the policy shouldn’t lapse; it will pay out when you die. In exchange, permanent insurance premiums are much higher than term, with common variations including Whole, Universal, and Variable Universal.

In my experience, most families’ needs can be best met with term insurance. Permanent insurance may be the ticket if your spouse is depending on your pension in retirement (which stops at your death), or if you’ll need a little extra cash to cover funeral or other end-of-life expenses.

Regardless of your specifics, the earlier you seek coverage, the more choices and cost breaks you’ll have. It’s also worth revisiting your coverage every few years as circumstances change. Plus, the higher the stakes, the more important it is to find an objective financial advisor to help. There is a lot of choice when it comes to insurance and you should ensure that yours is made wisely.

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