There are many types of life insurance out there, but it is not as difficult as you might think. You can choose from whole life and term life, and the different variations on those. Term is often good for a set amount of time, and it then expires. But whole life goes for your entire life, as long as you keep making the payments. There are benefits and drawbacks of each one.
Adding to Your Coverage
Term life insurance is a relatively new kind of insurance available. You may wonder if adding this to your insurance policy is worthwhile. It depends on how much income you are pulling in. Long-term care insurance has a relatively high premium, and it might not be appealing to everyone. To understand whether or not you need this coverage, you can review a guide to determine if it is worthwhile. When you understand the benefit of long term care insurance, you’ll be better able to make an informed decision.
Term Insurance
This is the simplest type of insurance. It lasts a set number of years before expiring. If you pass away before the time ends, your beneficiaries will get a death benefit, which is a certain amount of money. It is a simpler type of policy, and it is relatively accessible. When you make your monthly premiums, you are paying into the death benefit. You can have your beneficiaries get an annuity, monthly payment, or a lump sum. This is one of the more affordable types of policies, and the premiums usually do not cost that much. And if you are healthy, the costs will be even lower.
Whole Life
This type of insurance is permanent coverage, meaning it will not expire. You can continue to receive coverage as long as you keep making the premium payments. There are both death benefits and cash values associated with plans. Cash values are tax-deferred savings accounts that grow interest over the length of your policy. Your cash value component has interest growing at a specific, fixed rate.
Every month, some of the premium you pay into it will go into your cash value. It usually offers a guaranteed return rate. The amount of the premium that goes into the savings account depends on the policy itself. Over time, you can expect the cash value to slowly grow, and you can withdraw it when there is enough value. You may also choose to use it for taking out a loan.
Still, whole life could cost several times more than a simple term policy. And you would get the same death benefit, even though you were spending more for the whole policy. This policy type is a bit more complicated than the term since there are other things to think about. For instance, there are taxes, interest, surrender fees, and other expenses to consider. Still, it could be worth it if you need a cash value component for estate plans or endowment. And it could be helpful for those who have long-term dependents, like kids who have disabilities.
