It’s clear that life insurance is important for everyone to have. These policies allow people to provide for their families and cover things like funeral expenses after their passing. This can be especially critical for those who pass away unexpectedly and leave behind family in need of support. Despite its importance, good information about life insurance is often hard to find. It can be confusing to understand and many people need expertise on what is the best kind for them. Below is a quick summary and the general pros and cons of the three main forms of life insurance that may best suit the needs of you and your family.
Term Life Insurance
Term life insurance is an option that covers you for a set period of time before expiring. You can choose how long the term is although it’s typically for 10, 20, or 30 years. These are most commonly utilized to protect against a premature death and have a fixed death benefit.
-Much cheaper than most policies
-Simple and straightforward
-High payout for small premiums
-Has no cash value
-If coverage ends at a bad time, you’re out of luck
-Premiums will rise much higher for next policy
Whole Life Insurance
Whole life insurance is a form of permanent insurance that uses your level payments to grow at a tax-deferred rate. Once the cash value is equivalent to the death benefit, the total value will be paid out to the beneficiary. You can also borrow against these policies if you’re in need of cash for a big expense. If the value is not paid back, the amount of death benefit paid out will be reduced accordingly.
-Will cover your entire life
-Accumulates payments as a cash value
-Cash value can be used to pay for retirement or emergencies
-More expensive than term insurance
-Can be complicated/hard to understand
-Sometimes disappointing investment returns
Universal Life Insurance
This is another permanent variety that is very similar to whole life. The only major difference is you can choose to raise or lower the death benefit and premiums throughout your life as your needs change.
-More flexibility than whole life
-Value may grow more quickly
with greater ROI
-Lowering your premiums leads to lower cash value
-No guaranteed growth, carry greater risk
Life insurance is a complicated topic and the information above is only a general description. If you have further questions or want more detailed information, please don’t hesitate to contact us. We are happy to help!