Life insurance is a necessity for the vast majority of adults. It can also be a good idea to have a policy for children. Few people know exactly when they’ll die, but everyone will at some point. Taking care of final expenses can be a major financial burden for families who are mourning the loss of a loved one.
Additionally, many of these families will lose a breadwinner, and this will cause even more financial stress. Anyone who wants to proactively alleviate the potential for unneeded stress on their loved ones would do well to purchase life insurance.
Jacob Bailey from InsuranceHero.org.uk advises you get life insurance if you have anyone financially dependent on you. There are two basic forms of insurance, and each has some variations that are worth investigating.
Whole Life Insurance
Whole life insurance is a type of insurance that’s sometimes referred to as permanent insurance. As long as an underwriter accepts an applicant for a whole life policy, the applicant can maintain the policy for the length of his or her life, provided the premium remains paid.
The monthly premiums on a whole life policy stay level for as long as the plan stays in effect. They will never go up or go down. Whole life insurance will frequently come with an added cash value. This amount will build up over the length of the policy.
Effectively, those who want to build cash value will pay the insurance provider more than the monthly premium and allow the insurance company to invest it for them. Over time, policies can build a great deal of cash value that elderly policyholders can use for living expenses in addition to the death benefits.
Of course, a whole life policy has a death benefit. This benefit will differ based upon the amount of insurance a person decides to buy. The price will go up as the amount of insurance increases. A $100,000 death benefit will cost more than a $50,000 benefit. Additionally, it’s important to remember that whole life insurance carries monthly premiums that are higher than those associated with term policies.
The Benefits Of Whole Life Insurance Include:
- Stable premiums
- Death benefits
- Cash value
There are derivatives of whole life insurance that can offer slightly different terms. For example, universal life allows for flexible premiums in addition to the building of cash value. Permanent insurance is not the only option. The other major option is term insurance.
Term Life Insurance
Unlike a permanent policy, term life remains in effect only for the term that’s stated on the policy. The minimum term available is usually going to be five years, although there are occasional options for a one-year policy.
The term can go up to 30 years. Once an applicant is accepted for term life insurance, he or she will only lock in a given premium for the term of the policy. If the insured survives the term, the policy will no longer remain in effect. This means that it will be necessary to take out another policy.
Generally, younger people will get lower monthly premiums on both whole life and term policies. Because term insurance is only effective for a limited and clearly defined period of time, the premiums can be significantly lower than those associated with whole life policies. Additionally, term insurance does not build cash value over time.
A policyholder is paying only for a death benefit. The death benefit will be stated on the policy itself. Because a term policy and the death benefit associated with it runs out at the end of the term, those who hold term life insurance will see lower premiums per unit of insurance.
In fact, it’s possible to purchase a death benefit that’s several times higher than a whole life policy with a similar premium. Those who buy term insurance run the risk of losing their ability to be insured should they have major health problems. Once the term runs out, they may not be able to get another policy, or they may have to pay premiums that are much higher.
Whether to purchase whole life or term insurance policy is an individual decision. Those who do not have millions in the bank should have a policy if they have dependents. A whole life policy can be more of a long-term investment while a term life insurance policy is more of a rental arrangement.
Term insurance can provide many times a person’s income to provide for a family in the event of the insured’s death. However, it only provides a death benefit. It’s a good idea to check with a tax professional to see which option works best in each individual circumstance.
If you are interested in even more lifestyle-related articles and information from us here at Bit Rebels, then we have a lot to choose from.