Life insurance can be a reliable and safe way to help protect your loved ones. If something should happen to you, it can provide for your family by replacing lost income, covering the mortgage or rent, and paying off debts or medical bills. There are many types of life insurance, but the two most popular categories of life insurance policies are term life insurance and permanent life insurance (also referred to as whole life). Below is an overview of both types.
How Life Insurance Works
When you buy life insurance, you enter into a contractual agreement with a life insurance company which, in turn, pays a death benefit to your spouse, kids or other beneficiary you select. In return, you make payments to the insurance company, which are called premiums. Your payment amount is based on a variety of factors such as your gender, age, medical history, and the amount of life insurance you purchase.
Term Life Insurance 101
Term life insurance is a viable option if you need coverage for a specific time period, which is anywhere from one to twenty years or more. You can renew after each term. This life insurance type features lower initial rates that increase at regular intervals until the coverage ends. People typically choose term insurance to help cover specific financial obligations such as lost income, debts, mortgages, or education expenses. Term life insurance generally does not build cash value. With this life insurance, benefits are only paid if the insured dies during the period covered by the policy.
Permanent Life Insurance 101
Permanent Life Insurance is commonly known as whole life insurance. The purpose of this insurance is to provide long term assistance to you and your family. A whole life policy offers protection for your entire life. Rates for whole life insurance are based on your current age. So the rate does not increase as your age or health changes. The rates are initially higher with permanent insurance than term insurance; however, they are usually fixed during the life of your policy. In addition, whole life insurance can build cash value over years, which you can borrow against as needed.
Choosing the Best Coverage
Whether you need first-time protection or supplemental life insurance, you will want to assess your needs and resources before buying a policy. It is important to know that you are not limited to one type of insurance or the other. You may find a combination of term life insurance and whole life insurance is the best option for your needs. There are numerous resources available to answer any of your questions. If you are not clear on which option is best for you, a licensed insurance agency can provide you with a customized life insurance solution.
Take Action Now
Once you know the type and the amount of life insurance you need, it is important to contact an insurance agency you can trust. Your family needs the protection life insurance offers, and you will feel assured knowing that your life insurance provider will be there when you need it most.