Life insurance is a financial product that leaves money behind for your family when you die. It can be used to help them for many years, to replace lost income, or to pay off large debts such as your mortgage. You pay a monthly premium for life insurance. Your age, health, lifestyle, and how much cover you need, as well as what kind of policy you have will determine how much you pay.
There are two main types of life insurance: term life insurance and permanent life insurance.
Term Life Insurance: Term Life Insurance is Life Insurance is what most people know. If you die during this period, it
provides cash benefits to your loved one (also known as your beneficiary). The term is how long the policy lasts. General terms are more than 10, 20, or 30 years.
Term Life Insurance only offers a Death Benefit, which is the cash paid to your beneficiaries if you die during this period. It does not include a savings benefit as permanent life insurance. This makes is the most economical type of life insurance policy, at least initially. Many people are delighted to learn how affordable term life insurance can be, for example, a healthy 30-year-old can get a 250,000, 20-year term policy for about $ 13 a month.
- Getting term life insurance usually involves two decisions: how much coverage you want and how long you want it to last. Unlicensed insurance agents can help you choose the amount of coverage and terms. To get a general idea of how long term life insurance you need, check out our Life Insurance Needs Calculator.
Permanent Life Insurance: In addition to a death benefit, permanent life insurance has a number of features that term life insurance does not.
- The benefits of permanent life insurance include: Lifetime coverage: As the name implies, permanent life insurance pays you a premium throughout your life. Many people find peace of mind knowing that they will always have coverage in place.
- The advantage of survival: One of the advantages of permanent life insurance is that it can generate cash value over time which is mostly deposited on a tax-deferred basis like retirement and education plan assets. In the future money can be used for any need including important milestones like a down payment for a house, college tuition, or retirement. (Just be aware that withdrawing cash from the policy will reduce the death benefit if you do not return it.) Lots of options. There are several types of life insurance. Some offer guaranteed rates of return while others allow you to choose a mix of investments for a variable rate of return. Meanwhile, for some, you have to pay a fixed premium while others allow you to change the amount based on your financial situation. Even others allow you to avoid premium payments and increase or decrease your coverage over time.