Life insurance 101: Tips for Getting the Right Coverage

insurance tipsLife constantly changes and no one can predict the future, which is why life insurance offers peace of mind that your loved ones are protected financially should anything happen to you. There are many life insurance options available, which is beneficial because that means you can find the best one for your needs and budget.

While the global pandemic has put the question of mortality front and center and has more people seeking information, life insurance is really an evergreen need as there’s always value in protecting your loved ones.

To help you better understand life insurance, financial expert Salene Hitchcock-Gear, president of Individual Life Insurance at Prudential, answers top questions and provides guidance so you can make the right choice for your personal situation.

Why get life insurance?

Life insurance is an investment in your loved ones’ futures. Depending on the size of the plan, life insurance can help pay for anything from funeral expenses and cost of living to outstanding bills and retirement. It can even be designated as a charitable gift to a cause close to your heart.

And amid a global pandemic, the need for life insurance has become very clear. There’s an increase in awareness about the importance of life insurance as 11 percent of the general population has expressed interest in expanding their life insurance coverage since the onset of the pandemic, according to Prudential’s latest Financial Wellness Census. In addition, this figure nearly doubles for Black Americans, and COVID-19 has disproportionately affected this population in many ways.

Ensuring your financial house is in order can provide some peace of mind during an otherwise turbulent time. Life insurance can be a purchase that doesn’t break the bank, but keeps people protected from facing serious financial hardship.

What are the different types of life insurance?

Four of the main types of life insurance include term, whole life, universal life and variable universal life. Term life insurance is selected for a specified term, such as 10, 15 or 20 years, and offers coverage during this period. Whole life insurance is intended to cover your entire life span, and plans build cash value.

Universal life is also intended to cover your entire life, but with more flexible premiums; premiums paid in excess of the policy charges can earn interest to build cash value. Variable universal life is similar to universal life but the potential to accumulate cash value is based on equity performance.

When shopping for life insurance, it’s a good idea to speak with a financial professional to understand which plan would best suit your needs.

When is the best time to get life insurance?

Life insurance may benefit your financial plans at any age or stage of life. Here are some examples of why life insurance is important that you may not have thought about:

  • If you’re young, single and fresh out of college, life insurance can help pay for your student loans that your parents cosigned so they aren’t stuck with that debt if something happens to you.
  • If you’re married or have a child, life insurance can cover the cost of your mortgage and help pay for raising children. It might even help pay the cost of college tuition when they’re grown.
  • If you’re shifting your focus to retiring, life insurance can help you leave a legacy to your loved ones when you begin to tap into savings after you stop working.

Should you purchase life insurance online or with an advisor?

You can do either or a combination of both, depending on your preference. For example, for those looking to research and purchase online, some carriers, including Prudential, have term life insurance available for purchase online.

You may also decide, as many do, to research your options online and ultimately consult with a financial professional to determine a final purchasing decision.

For those who prefer to work exclusively with a live person, you can always find a financial professional to discuss your best life insurance options and purchase the right policy.

Is an employer-sponsored plan adequate?

If you are working, your employer may offer you the option to purchase life insurance as part of your benefits package. Depending on your specific situation, these plans could be enough for your needs. Just make sure you understand coverage, as many of these may be basic plans with bare-bones features.

You may want to compare options or purchase supplemental life insurance independently to ensure you’re covered adequately.

How much do you need?

The best way to determine the amount needed would be to consider what expenses your family would have if something happened to you, and how they would be able to continue enjoying their current quality of life if you were gone. Financial professionals and online life insurance calculators can help with the math, too.

Regardless of where you are in your financial wellness journey — whether you’re just starting out or nearing retirement — life insurance can be an important part of a holistic financial plan.