WEDNESDAY, MARCH 1, 2017
Do you find yourself puzzled when it comes to life insurance? Well, the good news is, you are not alone. Deciding what product is best for you and your family can be challenging. People often struggle with which option is right for them. There are two main types of life insurance: term and whole (or permanent). Both term and whole life insurance offer beneficial protection but each has diverse features. Let's start with the facts then you can decide whether a term or whole life insurance policy is the best choice for your loved ones.
What Is Term Life Insurance?
Term life insurance policies pay death benefits for specific time period. This means that if you die during the period covered by the policy, the proceeds would go to your beneficiaries. This type of coverage is referred to as "term" because the insurance lasts for as long as the term you select. The policy term can be as little as one year and up to as much as thirty years. If you were to stop paying the premiums, the insurance would stop; however, if you were to pass away during the selected policy term and continued to pay your premium, a precise lump sum would be paid to your loved ones.
How Much Does Term Life Insurance Cost?
Term life insurance tends to be simpler and a little more affordable than whole life insurance. Premiums for life insurance vary according to: age, gender, weight, height, health status, smoker/non-smoker and participation in high-risk occupations. Payments are usually made monthly or yearly. Once the payments are made, you and your family are protected for the agreed term. Term life insurance premiums increase at each renewal point. Depending on which term you chose, this increase may be at the end of your one, five, ten, twenty or thirty year policy. Term life insurance premiums are typically reasonable for healthy people under 50 years of age.
What to Know If You Are Considering Term Life Insurance:
Generally, you should consider a term life insurance policy to:
- get valuable coverage at an affordable price
- help provide for a family's loss of income, covering short-term debts and needs, providing additional insurance protection during the child-raising years
- supplement a permanent policy or work policy
- help cover unique financial responsibilities like a mortgage or college expenses
What Is Whole (or Permanent) Life Insurance?
Whole life insurance offers level premiums and life insurance protection for as long as premiums are paid. A whole life insurance policy will cover you for your whole life. In most cases, the cost of your premium will never change as long as you continue to pay. A whole life insurance policy is a permanent death benefit that is designed to provide life insurance coverage and stability plus other "living benefits". There is potential for additional growth of policy value through dividends. Meaning, as you pay your insurance premiums, some of what you pay is available to borrow against or cash out during your lifetime.
How Much Does Whole Life Insurance Cost?
Premiums for a whole life policy are commonly higher than a term life policy initially, but remain level regardless of your age for the life of the policy.The amount you pay initially depends on how much coverage you want/need. As with a term life policy, factors that also contribute to the cost of a whole life insurance policy are: age, gender, health, smoker, etc.
What to Know If You Are Considering Whole Life Insurance:
You should consider a whole life insurance policy if you want:
- protection for life
- payments that stay the same each year
- to be able to put additional money into the policy on a tax-favored basis
- cash value you can use while you are living
- a great long-term solution
So now it is up to you to decide which policy would be the best for you and your family. Each type offers its own unique features while also giving you valuable protection.Term life insurance tends to be cheaper and lasts as long as the policy is in effect; whereas whole life insurance, generally more expensive, is intended to protect you and your family for their entire life.
To estimate the amount of life insurance your family would need, first calculate everything you now provide for your family including: salary, benefits/health insurance, 401(k) & retirement savings and personal services such as, child care, cooking, home maintenance, etc. You would then want to subtract your personal expenses including annual spending on personal needs (food, clothing, entertainment, etc). Your goal should be to develop a life insurance plan that, following your death, will allow your family to live comfortably without your economic contribution.
Keep in mind that these are simply guidelines. Contact our office at 225-292-7680 if you have questions about your life insurance needs.
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