Which Type of Life Insurance Is Right for You?
Tuesday, August 22, 2017, 6:00 AM | Leave Comment
When getting life insurance, you need to understand that the terms will vary based on your unique personal situation. This is mostly the people who depend on you. It is only after the death of the insured that the beneficiary gets the money.
However, due to the high rate of abuse this insurance cover has faced, the terms are strict and the insurance companies are more stringent. You should also be very keen when choosing an insurance cover. Some of the terms outlined are often draconian.
Picking the right type of insurance is often confusing. Each option has its pros and cons.
The purpose of this post is to discuss a few guidelines that will enable you to narrow down your options and find the perfect cover.
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Term life
This is an ideal option for persons who need insurance for a specific period of time. This cover will enable you to match the exact length of the term policy to the length of your needs.
For example, if you have kids and need to make sure that they will get money for college education, you can go for the 20 year term life. Simply put, this cover will be ideal if you wish to get covered for a specific period of time.
The second reason why you may want to consider this option is when you need a large sum for life insurance but your budget is limited. The cover only pays after you die within the policy.
At the end of the policy term, the coverage will stop unless you wish to renew the policy. The problem with this option is that you will not get to build equity as it is the case with permanent insurance.
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Permanent life
This is the second option you should consider. It covers you for as long as you live. A death benefit will be paid whether you die within a week or after 100 years.
This option should be considered by people who wish to accumulate savings that grow on the tax-deferred basis.
You can use this cover to secure loans. If you die before the loan is repaid, the insurance company will collect what is due and then give the remainder to the beneficiary.
Unlike term life, with permanent life, the premiums are much higher. The good news, however, is that the premiums remain the same regardless of how old you get.
With term life, the premiums will be lower when you are young and increase as you age. Each time you renew the policy, the premiums will be revised upwards.
Under permanent insurance policies, there are other policies which include universal life, ordinary life and variable life. It is your duty to discuss all the terms with your insurance company before committing to any option.
The worst mistake that you can make is that of assuming the terms are the same in all insurance companies. They vary. Make sure you read the policy terms every time, even when renewing a policy.
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Tom Hardy is an insurance agent working with the insurance information institute. He enjoys educating the public on life insurance. You can connect with him on LinkedIn to keep learning more.
