Whether you’re scrolling through your laptop to catch up on your budget, ordering groceries on your tablet, or paying your rent, most of your important tasks can be done online. The same is true when it comes to buying the right life insurance. Traditionally, buying an insurance policy was a process that took several weeks and involved faxes, phone calls, and paper applications. However, now there are many affordable options that you can easily purchase online.
Understanding Life Insurance
Life insurance is an important part of any financial plan, along with your emergency savings, retirement contributions, and budget. This is a contract between you and a company that will protect your loved ones financially if you pass away. You pay a yearly or monthly premium, which allows the company to pay a death benefit if you pass away while the contract is valid. Your beneficiary will receive the policy payout.
Benefits of a Policy
There are many benefits of this coverage. Often, it’s easier and cheaper than you think. For example, term life insurance is an affordable and simple option. You can apply for and purchase it online easily. Another benefit is that it is often tax-free. If you were to pass away while having a policy in place, your beneficiaries will generally receive the death benefit without income taxes. This means that when you are deciding on the right amount, you can determine the future needs of your family without factoring in the tax code. You and your family will also have peace of mind from a policy. Even if you pass away and can no longer support them, you will feel calmer knowing that your family has a financial back-up plan.
How Much Coverage to Get
A good rule of thumb is to get a policy that is five to 10 times your yearly salary. Some might also include Medicare Advantage plans for 2021, which can be helpful to look out for. However, this is just a starting point. Factors such as debts and the number of financial dependents you have will also play a role. Using an online calculator can help you choose the right amount for your family. When you are buying life insurance online, it is a good idea to research whether you should consider a modified endowment contract (MEC). If your policy is considered MEC, you can withdraw amounts tax-free up to the value of the contributions you have paid in premiums.
Expenses That Life Insurance Can Cover
The primary goal of life insurance is to protect your loved ones if you pass away. The death benefit will go to your beneficiary if you die while the coverage is valid. The policy can pay for large expenses such as college tuition for children, mortgage, and end-of-life expenses. However, large expenditures are not the only costs the death benefit will cover. Many people use this money as financial safety for everyday bills during the difficult time after a loved one’s death. There are many things, large and small, that your policy can cover.
- Funeral expenses
- Loss of income
- Childcare expenses
- Debts, such as credit card balances
- Bills, like phone or Internet costs