You must familiarize yourself with the two main types of life insurance: term and whole life insurance.
Purchasing life insurance now provides a much needed financial safety net for your dependents later if you pass away and are not around to take care of them. After you are gone, your family can use the proceeds to cover any funeral costs, college tuition, mortgage payments, or any other expenses you contributed towards during your living years. To better understand the intricacies of life insurance, you must familiarize yourself with the two main types: term and whole life insurance. Term life insurance is the simplest to understand, and usually has the lowest prices. Whole life insurance, which is a form of permanent insurance, is a bit more complex and tends to cost a bit more. There are usually additional benefits though, through a whole life insurance policy. Whole life insurance is one of the most well-known and simplest forms of permanent life insurance. If you wish to learn more, read on about the main differences between term and whole life insurance.
How Term Life Insurance Works
Term life insurance provides you with necessary coverage for a specific time period. It is often called “pure life insurance” because it is designed only to protect your dependents in case you happen to pass away prematurely. If you’ve got a term policy and die within your term, your beneficiaries will receive the payout. The policy doesn’t have any other value. You pick the term when you purchase the policy. Standard terms usually are 10, 20, or 30 years. With most policies, the payout, which is known as the death benefit, and the cost, known as the premium, stay the same throughout the term.
When you shop for term life insurance:
- Pick a term that coincides with the years you’ll be paying bills and want life insurance coverage just in case you die early
- Buy an amount your family would require if you were no longer there to provide for them. The payout could replace your income and assist your family in paying for services you perform now.
How Whole Life Insurance Works
Just like all permanent life insurance policies, whole life insurance provides lifelong coverages and includes an investment component that’s known as the policy’s cash value. The cash value grows slowly, tax-deferred, which means you won’t pay any taxes on its gains while they are accumulating. You could also borrow money against the account or surrender the policy for cash. But if you do not repay loans with interest, you will reduce your death benefit. And if you surrender the policy, you will no longer have coverage.
Whole life insurance is an excellent choice because:
- The premium will stay the same for as long as you live.
- The death benefit is fully guaranteed.
- The cash value account cultivates at a guaranteed rate.
Independent Healthcare Insurance Brokers You Can Trust
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