Which Type of Life Insurance Is Right for You?
Choosing the Right Life Insurance for Your Needs
Everything about life is uncertain. Even when we carefully plan out certain aspects of our lives, the truth is, we have no control. Things can change in a second. That’s why there is life insurance. Because when the unexpected strikes, life insurance will help you take care of your loved ones, even if you’re no longer around to do it yourself. Also, if you have life insurance coverage through work, it is best to get additional coverage, as sometimes your work life insurance policy doesn’t provide enough coverage.
With so many different types of life insurance, how do you know which is the best one for you?
Learn About Available Policies
Before you make a decision, you need to understand what each type of life insurance coverage has to offer:
Term Life Insurance
It is generally the most affordable type of life insurance, which makes it accessible to most people. It will provide coverage within a term, usually 10, 15, 20, or 30 years. If something were to happen to you within the specified time frame, your beneficiaries would receive the payout benefit.
Permanent Life Insurance
Contrary to a term life insurance policy, permanent life insurance provides coverage for life. This type of insurance is more expensive and builds cash value over time. These are the three most common types of permanent life insurance:
- Whole Life Insurance: its value increases on a set schedule. At every anniversary, you will find out the exact cash value of your policy. Your cash value and death benefit are negatively affected by taking loans or withdrawing from your plan.
- Variable Life Insurance: Allows you to make stock market investments with your cash value. Your policy will fluctuate depending on how your investments perform.
- Universal Life Insurance: Earns an interest rate —set by the insurer— on the cash value, usually put towards high-quality corporate bonds. The interest rate may change, but this policy offers a guaranteed minimum rate, so it will never go below that number.
Define a Coverage Amount
Coverage should be determined based on the needs of your loved ones to ensure they can sustain their lifestyle after you’re gone. Things like mortgage, credit card debt, money for college, or to pay off loans, should all be factored in when making this decision. Talk to your agent to learn more about your life insurance options.