Many people dismiss life insurance because it is not something they really want to be thinking about. Additionally, they do not fully understand how the coverage works or all of their coverage options, so they may feel their money is being misplaced towards something that is not necessary. The bottom line is, if you have people who depend on your financial support, then it’s important to educate yourself on life insurance options before making a decision.
Term: This is typically the option that is easiest to understand and comes at the lowest cost. This is the only coverage where you buy for a specific period of time, with permanent options available through whole, universal, and variable life insurance. Policies for the term can vary anywhere between 1-30 years with the common term around 20 years. These policies can be renewed, but the premiums will increase based on age and health factors.
Permanent life insurance options listed below provide an opportunity for savings, as they build cash value that can grow tax-free.
Whole Life: Hence the name, the whole life insurance policy would be purchased to cover you for your entire life if the premiums continue to be paid. Your premiums will remain constant and the company will invest a portion of your premium that becomes cash value. The premiums here will be higher in the earlier years compared to term life insurance, but it will even out because the premiums will not increase over time.
Universal Life: This is another type of permanent coverage option similar to whole life insurance, but with a little more flexibility. You have the opportunity to change the amount and frequency of premium payments or pay a specified amount in a lump sum. Your potential earnings on savings is higher with universal life where funds can grow tax-deferred and there is usually a guaranteed return on the cash value. However, this coverage generally has higher fees and premiums could increase.
Variable Life: Lastly, variable life insurance is another permanent coverage where you have control over the investment decisions for the cash value portion. With this policy, you will generally have fixed premiums, but this could be riskier because no cash value is guaranteed on your investments.
While life insurance is not something we want to be thinking about right now, it could be a smart decision moving forward to help protect your family’s financial wellbeing. Rates are more affordable for younger, healthier individuals and you can begin with tax-free savings potential through a permanent coverage option. If you’d like more clarification on any life insurance policy or a quote, please Contact Us.