Protect Your Finances
It’s a topic no one likes to discuss. But protecting your finances requires considering how your loved ones will survive if the unexpected happens to you. Enter life insurance.
It’s a topic no one likes to discuss. But protecting your finances requires considering how your loved ones will survive if the unexpected happens to you. Enter life insurance.
Choosing the best type of life insurance depends a lot on your personal needs. So, knowing why you’re buying a life insurance policy can help you decide which kind of policy to purchase.
Basically, life insurance comes in two varieties: term life and permanent (or whole) life. Determining whether you want one type or the other or a combination is your first step.
Term life policies provide coverage for a certain number of years (the term) and generally pay a death benefit if you die during the policy’s term. Term insurance doesn’t build cash value. If you outlive the term, the policy lapses and your beneficiary gets nothing. Generally, term life costs less than permanent life, although premiums may increase over time.
If your main reason for buying life insurance is to ensure your family’s financial well-being for a finite number of years — until your children are out of college, for example — term life may be a good option.
Along with providing a death benefit, permanent (or whole) life insurance builds cash value. A permanent life policy typically costs more than term life.
There are three basic types of permanent life insurance. Traditional whole life offers minimum guaranteed cash values and death benefits. Universal life is similar, but premium payments can vary from year to year. Policies earn interest at a rate determined annually. Variable life has a guaranteed minimum death benefit, but cash value depends on investments you select for your policy.
