A life insurance policy protects your loved ones against the loss of your income after your death, and helps to preserve their standard of living. You’ll name a beneficiary to receive the proceeds, and in exchange, you’ll pay premiums as outlined in the policy terms. Once you’ve determined how much you need, factoring in future expenses and current debts, you need to decide on one of the four types of life insurance: term, whole, universal or variable. Term life insurance covers you for a specific period of time, like one, two, ten or twenty years. The death benefit is paid only if you die within the policy term. Premiums generally start out lower, depending on your age, which allows you to buy more coverage.
Whole life or permanent insurance covers you as long as you pay your premiums. The policy accrues a cash value that you can collect if you terminate the policy. It pays a fixed amount on death, and premiums are usually higher than for term insurance. Universal life insurance is also permanent but this option offers greater flexibility than whole or term. You can increase or decrease the cash value and death benefit if your needs change, with a related rise or drop in premiums. Variable life insurance is another type of permanent life insurance, but with an investment component. The cash value is invested in sub-accounts similar to mutual funds. Variable life is considered a security because of its investment risk.
If you’d like to learn more about the pros and cons of different insurance policies, call us or visit our website today.