Choosing a life insurance policy can be a confusing process. You may have a lot of different options available to you depending on your personal circumstances. There are two main types of life insurance. Both term life insurance and whole life insurance can provide you with the benefits you and your family will need if something happens to you. However, which is the better option for you and your loved ones? It’s important to remember that there is no one-size-fits-all option.
Term life insurance policies are set in place for a fixed period. The owner of the policy makes payments in return for coverage during that time. The shortest amount of time that most term life insurance plans can cover is one year, but it is far more common for people to purchase policies that cover 10, 15, 25, or 30 years. If you die during the period of coverage, your insurance money will be paid out to your beneficiary. This is usually your spouse or your dependent children. They will be able to receive funds disbursed from the insurance company in order to cover funeral expenses as well as provide for living costs. Term life insurance is very affordable and is good for short-term goals.
When shopping you will quickly find the best life insurance companies offer a lot of different options with whole life policies. Whole life insurance has a few distinctive categories. One type is referred to as a non-participatingpolicy. This is where important values, such as premiums or death benefits, are decided upon when the policy is issued. These cannot be altered over the life of the policy. If you choose this option and your original estimates for death and survivor benefits are too low, then the insurance company will make up the difference. If your estimates turn out to be too high, then insurance company keeps the difference.
Another type of whole life insurance, called a participating policy, is an arrangement where excess profits or dividends are shared by both the insurance company and the policy holder. As a bonus, these dividends. are usually not taxable. The premiums for any whole life policy quickly become a stable and expected part of your budget. It grows a cash value that can provide for your family if you die unexpectedly.
Purchasing a life insurance policy can be a great way to plan for the future, but you should do your research before you commit to any one plan. Talk to a life insurance agent about your life circumstances and get professional advice on the options available to you.