Everyone should look into getting life insurance sooner or later; no matter what your reasons are, getting a policy to cover you can be one of the best decisions you’ve made in your life. Whether you want to be insured for your old age, for your health, in case of accidents or some other reasons, the appropriate policy can save you more trouble than you can imagine. However, it is also important to know what types of life insurance policies are out there, so you can determine which one is better for you.
First of all, there are two main types of life insurance policies: term life insurance or whole life insurance, also known as permanent life insurance. Both can have their advantages and disadvantages, so it depends on what you actually expect from one. A term life insurance policy is set for a limited period of time, and it can range from one year to twenty or even thirty years. This type of insurance covers you for as long as you pay the premiums, but it doesn’t build cash value; if you die while it is still valid, the beneficiary of your policy – which can be your family, a spouse or whomever you want – receives the cash value.
Term life insurance can be a good idea for those who anticipate future financial responsibilities, such as paying for a mortgage or children’s college fees. You should know however that, like with all life insurance policies, premiums are generally higher as you get older; that is because the chances of your dying sooner are bigger, which means you won’t pay premiums for as long as the company would like you to.
The other main type is permanent life insurance, which protects you for as long as you live; unlike term-life policy, some types of whole-life policy also accumulate cash value, which means your loved ones can receive a healthy sum of money upon your demise. However it isn’t recommended to purchase a permanent life policy just for that, as it’s main purpose is to protect and cover you. Premiums for this type are also higher in the beginning, but this depends on what details you establish with your agent and what flexibility you aim for.
On the long term you can gain more from permanent life insurance but like we said, this depends on your particular needs; you should also be aware that you can combine the two if you find it necessary. You can, for example, take a permanent life insurance policy as foundation and supplement it with term life insurance for a while, like when you pay for studies or mortgage a home.
There as the types of life insurance policies you will be confronted with, but when you start discussing them in detail you will see that there are many more aspects to consider, such as whether you want an underwritten policy – which is the common type – or a guaranteed issue policy, which is when you don’t wish to subject to a medical exam because a preexisting affliction could increase your premiums too much.