Life insurance is more than just something that your grandparents purchase when you were a child. Life insurance is a tool that you can use for many different stages in your life. It can protect you for certain periods of time or even permanently, but most people don’t really understand how their policies work. In later blogs we’ll discuss the advancements in life insurance, such as living benefits, but for right now let’s start with the basics.
Term life insurance policies are typically the way to get the largest death benefit for the least amount of money. The only drawback is the policy is only good for a certain number of years. Term policies can cover loans for houses, as well cars, or boats. The last thing we want to do is leave our loved ones with a bill. Term insurance policies allow you to have coverage typically from ten to thirty years. These policies allow you to have protection at certain points of your life while you may not need that same coverage in the future. A mother or father may each take out a term life policy to ensure that if something was to happen to either of them while the kids are growing up or finishing college. Term policies typically have a convertibility feature, which means you can convert your policy to a permanent policy without having to do a medical exam. Such features are another reason why term may be a more suitable option for someone who has a tight cash flow now, but plans on earning more money in the future.
Whole life insurance in simple terms is permanent. It guarantees that as long as you pay your monthly, quarterly, semi-annual, or annually, it doesn’t matter at what age that you pass away, your beneficiaries will receive the death benefit. Whole life insurance also has what’s called cash value. It’s almost like a forced savings account. With these policies, there is a guaranteed amount that your policy will grow to every year. This amount of money can be borrowed from, and either paid back to the policy or reduced from the insured's death benefit when he or she passes away.
Life insurance can be a basic or a very advanced tool. The question is “which policy is right for me?” It’s best to speak with a qualified agent to try and figure out if term, whole life, or a mix of the two is right for you.