With all of the life insurance options available, it may seem difficult to choose the right type of life insurance.
You need to start by deciding between term life and permanent life insurance.
Consider a term life insurance policy if you need life insurance for a specific amount of time. For example, if you want insurance to cover your working years as possible income replacement if you were no longer around.
Term life insurance is good choice if your money is limited. Since term life insurance provides protection for a specific amount of time, and it’s not a cash value policy, the rates will be lower than whole life insurance.
As you enter different ages of life, your life insurance needs will change. Many term life insurance policies are convertible to a whole life insurance policy. The options will depend on your policy and insurer. Term life conversion allows you to switch to a permanent policy without re-applying or taking a life insurance medical exam.
However, a whole life insurance policy will last for the duration of your life. If building cash value is important to you, look at permanent life insurance options. But if you’re purchasing a permanent policy only to capitalize on the cash value accumulation, depending on the policy, you’re better off putting your money into a savings or investment vehicle, so you’re not paying for the life insurance and charges within a permanent policy.
And cash value isn’t typically intended for beneficiaries. Upon death, any cash value generally reverts back to the life insurance company. Your beneficiaries get the policy’s death benefit, not the death benefit plus cash value. That said, some policy types will offer the death benefit plus cash value, but for a higher price.
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