Life insurance gives you the peace of mind that having personal protection that provides your family with a financial protection at the time of your death. However when it comes to choosing a life insurance plan, there are several points to keep in mind. Your age, your income, and your personal approach to taking out this type of coverage can really make a difference, not just for your budget, but to the death benefits that your family or beneficiary is going to receive.
Two Main Types of Life Insurance
You will usually find that there are too common types of life insurance, and it is likely that you take out one of these; term life insurance and whole life insurance. The first is a policy that protects you for a specific period of time that could be as little as a whole year, or a set of years that you decide and up to 30 years. The latter is exactly the coverage for the term that it suggests; a lifetime, hence it is also commonly called permanent life insurance.
Advantages of Term Life Insurance
Term life insurance is a low-cost insurance policy with no loan or cash value, and therefore it basically offers the price of the policy as the sole death benefit that your family can claim when you pass away.
PROS: It is an inexpensive life insurance option It can be taken out for a small period of time It can be canceled
CONS: It does not build up cash value Makes no sense at all when it is bought late in life for a long period of time
Based on your personal needs, some other cons and pros can be added to this list.
Advantages of Whole Life Insurance
As noted early in this article, whole or permanent life insurance is a policy that provides coverage for a lifetime for a fixed amount, charging an annual premium to the policy holder.
PROS: This type of insurance policy builds up cash value Dividends can be borrowed while you are alive It also pays death benefits
CONS: Cannot be canceled You have to pay premiums for a lifetime
Similar to the previous, whole life insurance may have additional advantages and disadvantages based on your personal profile and needs.
Making the Right Decision
Taking out life insurance is not a kids' game and should be carefully planned because if you buy whole life insurance when living on a tight budget, it is likely that you will have trouble paying the premiums or that they become a financial burden with the passing of the time.
Every individual has unique life insurance needs and therefore you are the only person who can determine what kind of life insurance is the best for you. Optionally, you can opt for one out of two life insurance variants that also produce cash value overtime; universal life insurance and variable universal life insurance, which are designed for people who think term life insurance is not enough, but whole term life insurance is too much. The choice depends on the reason you want life insurance and which type is the best option for your particular needs.
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