Deciding on the type of Life Insurance.
Life insurance is a long-term commitment. There are three main questions that you need to ask yourself:
How much insurance do I need? Think of of how much your spouse and family will need to live comfortably.
What am I trying to accomplish with life insurance? Are you trying to gather funds to pa for education? Providing a way to pay estate taxes? Are you in need of supplemental income for retirement?
How much can I afford to pay for a policy? Think about this question as this is an important in selecting the type of life insurance.
After pondering the above questions and speaking with a life insurance agent, your next step is to choose which type of insurance best meets your needs.
Term Life Insurance
Term Life Insurance works best if:
* You need insurance for a specific period of time
* Your budget is limited but you need protection for your family
* You want to match the length of the policy term to the length of the need. For example, if you have young children and want to make sure that there will be funds to pay for their college education, you should consider 20-year term life insurance. Or if you want insurance to repay an outstanding debt that in a specified time period, buy a term policy for that period.
Generally speaking, term life insurance pays only if you die during the term of the policy, therefore the rate is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike whole life insurance, you will not build equity in the form of cash savings. If you think your financial situation will change, you can also look into convertible term policies. These allow you to convert to whole life insurance without a medical exam in exchange for higher premiums.
Please note that premiums are lowest when you are young and continue to increase as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies will require a medical exam at renewal in order to qualify for the lowest rates.
Term Life Insurance Advantages
- Receive protection at the most affordable price
- You have the option to convert to permanent policy
- Income-tax-free death benefits
Whole Life Insurance
Whole Life Insurance works best if:
• You need life insurance for your entire life. A Whole Life Insurance policy pays a death benefit regardless of when you die.
• You want to accumulate tax-deferred savings which could be a source of borrowed funds. The savings piece can be used to pay premiums to keep the life insurance active, or for any other purpose you choose. You can borrow these funds even if your credit is unfavorable. The death benefit acts as collateral for the loan, and if you die before it is repaid, the insurance company collects the amount that is due before determining the amount that goes to your beneficiary.
Keep in mind that premiums for Whole Life policies are normally higher than for Term Life insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term premiums can increase exponentially each time you renew.
Advantages of Whole Life Insurance
- Consistent premiums
- Lifetime protection
- Tax-deferred cash value
- Access to your cash value to use as your discretion
- Income-tax-free death benefits
Selecting a life insurance company
Listed below are a number of factors to consider when selecting a company to fulfill your life insurance needs. Every individual situation is different, therefore you need to talk to an agent and they can help you select the best policy.
Request a free life insurance quote from top companies today.
Before choosing a life insurance carrier, you need to evaluate their business, offerings and ratings. Make sure you receive answers to the following questions:
Do they provide good customer service?
How much will the policy cost?
Are they licensed in my state?
How favorable are the ratings and customer satisfaction?
Will it be easy to manage my account?
What types of policies are available?
What are the company’s assets?