We’ve all heard of someone passing away suddenly without having life insurance to protect their family. It’s a tragedy that can be prevented if you find the right policy for your needs, and it’s why life insurance is important.
The problem is that life insurance seems complicated to those not involved in it on a day-to-day basis. However, it’s much simpler than it appears, starting with the three types of life insurance: term, whole and universal.
Types of Insurance Policies
Term life insurance offers you the opportunity to get coverage for a specific length of time. When you agree to a particular policy, your premiums are set at a certain rate and will not change. However, when the policy ends, you will have to get another policy, and the rates will be much higher because you will be older.
Whole life insurance stays with you for the rest of your life, and the premiums are also fixed. It also has an investment component. Although life insurance investment works for some people, it doesn’t make sense for others. Therefore, all life-insurance-as-investment policies should be discussed with a financial advisor.
Like whole life insurance, universal insurance is an investment-style life insurance policy. Its rates are based on the market, so premiums and payout will fluctuate accordingly. Again, it’s best to talk over your goals before determining if whole life makes sense.
Term Life Versus Whole Life Insurance
Many people struggle to determine if term life or whole life insurance makes more sense. Some key items to keep in mind include:
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Term life insurance lasts up to 30 years.
Depending upon your age, it may make more sense than whole life coverage.
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Both term and whole life offer fixed premiums.
This locks you in with a rate that won’t increase.
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Whole life gives you an investment vehicle.
In the case of investments made through a whole life insurance policy, you have the benefit of tax-deferment. If you choose to cash out your policy, you will pay taxes at that time.
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You can get a lower premium rate on term life.
With that being said, you will also lose your investment if the policy runs out.
No matter what kind of life insurance you’re considering, it’s best to sit down with a local independent agent. Agents can help you understand which insurance is best-suited for your needs, such as a term life or whole life policy. They can also give you pointers on ways to lower your rates, such as not smoking, getting into better health and not waiting until you’re older to get started — since age plays a huge factor in determining rates.
The longer you wait to get any life insurance policy, the more you’ll pay for premiums. Act sooner rather than later, and don’t let another birthday come between you and life insurance coverage.