Tips for Choosing the Right Type of Life Insurance
Thinking of purchasing life insurance? Good idea! Buying life insurance is a very smart move, no matter your budget, age, or health status. But navigating the complex world of life insurance can be a little complicated. With so many different types to choose from, how are you to know what’s best for you and your family? Here’s a quick rundown on the most common types of life insurance and some tips to help you weigh your options.
Term Life Insurance
Term life insurance is an affordable type of life insurance that is great for people shopping for low-premium options. U.S. News explains that term life insurance may be a good option for people who want to keep providing for their spouse and children if they die unexpectedly. Term life insurance is popular among young families, couples who share a mortgage, and people with substantial debt. Term life insurance only covers you for a predetermined length of time and will pay out your death benefit if you pass away during this period. The younger and healthier you are, the cheaper your term life insurance premiums will be.
Whole Life Insurance
Compared to term life insurance, whole life insurance is more expensive. This is because whole life insurance lasts for your entire life instead of a specific duration of time. If you purchase whole life insurance, the policy will cover you as long as you continue making payments.
Whole life insurance also includes a savings component where you can accumulate cash value in addition to the death benefit. This savings component can be invested or withdrawn for emergencies. Although whole life insurance should not be used as an investment, it can be a good option for parents of children with disabilities or people who want to guarantee a large inheritance for their kids when they pass away.
Universal Life Insurance
Universal life insurance and whole life insurance are similar. While both are types of permanent life insurance, universal life insurance gives you the flexibility to make your premium payments when and how you want. This means you can reduce or increase your premium payments as your personal financial situation fluctuates. Higher premium payments will lead to a higher death benefit and vice versa. This allows you to make changes to your policy to fit your needs during different stages of your life. For example, you could make higher premium payments while you have dependents to ensure a high benefit payout if you pass away unexpectedly, then reduce your payments later in life.
Final Expense Insurance
Final expense insurance, also known as burial insurance, is an affordable alternative to life insurance that is popular among seniors who don’t need the substantial payout that comes with traditional life insurance. Final expense insurance is typically used to pay the costs of your final arrangements, like your funeral and burial, and to cover existing debts. Purchasing final expense insurance is a great way to prevent your loved ones from shouldering these costs after your death. You can research different burial insurance policies and companies—such as the Lincoln Heritage reviews—on sites like ValuePenguin.
As you sort your options, you’ll need to make a couple more decisions. First is how much insurance you need. According to Forbes, the rule of thumb is to buy enough insurance to cover 10 times your annual salary. Also take into account the riders your family should have in place, like an accelerated death benefit, but be aware of potentially duplicating your coverage. Your insurance agent or a financial advisor can help you finalize the details of your decision.
Finding the right life insurance policy can take some time, and there are pros and cons to every choice out there. Besides choosing a type of life insurance, you also have to decide on the amount of coverage you need as well as any riders that would be beneficial to your policy. Think carefully about the needs of you and your family to ensure you make the right choice!