The 3 Best Types of Life Insurance — How Do You Know What’s Best for You?
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As soon as you enter the workforce, you’ll likely be inundated with information about and even offers for life insurance. Despite the information overload, this can actually be quite beneficial for you in the long run, as the importance of life insurance is undeniable. For one thing, you never really know what the future holds for you, but life insurance can single-handedly guarantee that your family will be financially secure, no matter what, as it can pay off debts and other expenses and provide for your family upon your demise. For another, life insurance can potentially supplement your income in the future when needed, making it a really solid investment and savings instrument.
Indeed, there are many reasons to get life insurance. However, not all life insurance policies are created equal. Money Solutions Online reminds you that it’s very important to get to know the different kinds of coverage you can get before settling on the policy that serves you and your family’s needs best.
Term Life Insurance
One of the main types of life insurance is term life insurance. Unlike its more permanent counterpart (more on this later), term insurance has no cash value other than the requisite guaranteed death benefit. However, this makes it a lot less expensive and, by extension, more popular. Moreover, as the moniker suggests, term life insurance only provides coverage for a specified ‘term’ (e.g., 10, 20, or 30 years), and its premiums are based on these terms.
Because of the way it is structured, term life insurance is appropriate for people who have a more immediate need for it. As a downside, outliving the term of your policy will inevitably entail the need to buy a new one, which could be more expensive, as term life insurance rates are calculated based on life expectancy.
Permanent Life Insurance
Also known as whole life insurance, this policy is designed to provide coverage for life, with a benefit paid out to your beneficiary at the time of your death — essentially the most basic tenet of life insurance. However, what sets permanent life insurance apart is that a chunk of the premiums that you pay goes toward a cash value that accumulates over time.
Indeed, it is the latter that makes permanent life insurance particularly compelling. This is because the cash value part of the policy can be used as savings that you can borrow against if the need arises, even while you’re still living. Not only that, but it can also be leveraged for tax purposes, which is undoubtedly a welcome bonus. The downside: Whole life insurance can be more costly, plus the savings portion of your policy is often subject to the economy’s volatility.
Final Expense Life Insurance
Now, there are also other, more special types of life insurance that are designed for very specific purposes. One such variant is the final expense insurance. Also known as burial insurance, this policy can benefit everyone, regardless of age, but is particularly well-suited for seniors. In fact, it’s arguably a crucial step in every senior’s end-of-life financial planning, though this can be purchased long before retirement. The great thing about burial insurance is that it can act as a safety net for your family upon your demise. Essentially, this type of insurance will cover any outstanding debt or bills you might leave behind, as well as take care of funeral expenses, which will, no doubt, alleviate much of the financial hardship for your loved ones.
However, while most final expense insurance can, indeed, cover these costs, it’s still a good idea to do your due diligence to find the right (and sufficient) coverage for you. As a rule, it’s more than wise to opt for reputable companies with high Better Business Bureau (BBB) ratings.
Other Types of Life Insurance
While these are the three primary forms of life insurance, there are other options that can be added to policies to help with specific situations. If your income is limited and your medical bills are high, you may fear that your home might be repossessed by the bank. This process is called foreclosure. The foreclosure definition is when a lender takes legal action against a borrower who cannot pay their home loan. If you believe this may happen to you, consider mortgage life insurance.
Suffice it to say, there’s a type of life insurance for everybody. Your choice boils down to knowing what you need and what you can afford. So take the time to research. Your peace of mind depends on it.
There are many money management tools available online, but Money Solutions Online provides advice for biblically-based money management. Visit us online to learn more about how to handle your money as Christ recommends.
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