Term Life Insurance Vs. Permanent Life Insurance: Which Is Best For You?
Choosing between life insurance types can often be a tedious and long process. There are many options available for the policies, as well as terms within those options. Companies offer so many types because everyone seems to need something unique to their situation, lifestyle, etc.
Two of the most common types are term life insurance and universal life insurance. Though there are several other kinds of coverage, these are the two that are most often used for families or businesses.
Term Life Insurance Explained
This is a policy set up to cover a person for a specific amount of time. During this time as long as premiums are paid, the same death benefit will always be held. Premiums and coverage never change, and after the term is up, there may be an option for renewal.
This kind of coverage is most often used by parents with families that only need coverage for a specific time period. For instance, a family with a mortgage might be best off to have both spouses covered. In case of death, during the length of the mortgage, the coverage amount for whoever passes will be paid to the other spouse, allowing them to pay off the mortgage.
Another case for using term life insurance is when there are still children at home. Being covered until the youngest child is old enough to support themselves gives both spouses comfort in knowing that the children would be taken care of if anything were to happen. Often times this kind of policy will remain in effect until the last child leaves home at age 21.
One last example where people often use this type of policy is with a stay at home parent. A death benefit can keep the rest of the family financially afloat in regards to daycare for younger children, and other spousal duties. It's very important to consider what would happen to a family if a stay at home spouse were to pass away. Often times they are over looked because they have no income. The money they are saving the family though, in cleaning and daycare bills, adds up and should be considered for their own term life insurance policies.
Permanent Policies Explained
Permanent policies are characterized by their cash values and death benefits. One of these common policies is universal life insurance. This kind of policy is used for people who want to have a more hands on approach with their coverage and cash value.
The popular idea behind universal life insurance is that the premiums, pay out, and cash value are all decided by the owner. An amount of money is left in their account and monthly premiums can be taken from this amount to cover the death benefit desired. If their wishes change, the universal life insurance policy is easy to alter by additional deposits. The cash value can also be used for certain investments, which allows the owner to have more control over their money.
Have More Control Of The Investment
There are many reasons to choose the universal life insurance policy over other kinds of policies. If the owner wants to be able to decide where money is invested, this is a great way to have that control. Of course, by having this control the owner must also keep an eye on the balance to be sure that there is enough money for the death benefit they desire.
The transparency of the universal life insurance policy is a nice addition as well. While most other policies have a regular premium, all the owner sees is that one price is paid. In universal policies, they will have access to each itemized fee taken comparable to a bank statement.
People also like to get this kind of coverage because it is often more affordable. As the owner controls how much of a benefit is needed, they get to decided how much of a premium to pay according to that benefit as well. One last benefit to permanent policies is the fact that they are not canceled. As long as money is in the account, and coverage fees are covered, a benefit will be paid upon death.
Choosing the proper death benefit for your needs requires a lot of consideration. There are many options as far as the kind of coverage you want, and whether you want to be able to benefit from the investment while you are still alive. A person's health and age will also be taken into consideration to adjust the premium of the policy. Taking the time to research your needs before you discuss them with an underwriter will assist you in being that much more prepared for this large purchase.
Choosing What Is Best For You
While it seems like there are a lot of options, this is only to express how individual each person's own needs are. The Internet provides a way for you to gather all of the information you need prior to speaking to an advisor, but they are usually available for questions, so don't hesitate to call one. In the mean time, take your time in considering what option best suits your needs and when you are ready, start looking into life insurance quotes.
by: Chris Harmen