Whole, Term And Universal Life Insurance - Which Type Is Best For You?
Getting insurance is likely one of the most important decisions you will make, because it will involve the financial security of your family after you've gone. Although a loved one's death is not a favorite topic of discussion, it is something we will all have to face at one time or another.
But although you may not be there physically to help your spouse pay the mortgage or send your children through school, your investment in a life insurance policy can be a way for you to continue your contribution and provide much peace-of-mind to those who are left behind.
Three Main Types Of Life Insurance: Term, Whole And Universal
Whole, life and universal are the three most common life insurance types offered by all companies. And each has different benefits. Deciding which life insurance type is best for you will not only depend on whom you want to protect, but on what your financial goals are.
Term Life Insurance
The most basic type of life insurance coverage is the term life insurance policy. It can also be the most affordable, which is the reason why many people choose this option. Term life insurance covers a set time period, usually ten, twenty or thirty years. Should the policyholder pass away while a term policy is still in effect, that person's beneficiary receives the policy's face value in a lump sum.
The Best Time To Get Term
Term life insurance is a great option when you need to ensure coverage for a temporary period of time. Many policyholders obtain term insurance in order to give them a safety net as they build their other savings. Once those financial goals have been met, a term life insurance policy no longer becomes necessary.
How Much You Will Pay For Term
One of the things that makes term life insurance so attractive is that its premiums don't change throughout the time the policy is active. How much you will pay on a term policy will be largely dependent on the company you've chosen and the market's rates.
Whole Life Insurance
As its name may attest to, whole life insurance offers coverage for the life of the policyholder. Also called permanent life insurance, whole life has three main benefits: premiums which don't change, options for cash value growth and a guaranteed death benefit.
The Best Time To Get Whole Life
Whole life insurance is usually used by a policyholder as a part of their estate planning, as well as to provide some flexibility with finances. In addition to the death benefit your beneficiary will receive, the cash value built up within the policy over time can be accessed without penalty for large purchases, such as renovation materials or college tuition. Generally, the earlier the better is the best time to get whole life, as the longer a whole life policy is held, the more cash value will be accumulated.
How Much You Will Pay For Whole Life
Whole life policies allow your premiums to stay the same over time. Generally, half of your monthly premium payment will go toward life insurance, and the other half toward the cash value component. You may, depending on the company, be offered a schedule of payments that will cost you less in the beginning, but increase later on and then level off.
Universal Life Insurance
Another type of permanent life insurance coverage, universal life leaves the decision of the amount of life insurance and premium payments up to the policyholder. Upon death, the benefits received by your beneficiary are tax-free, as is the cash value growth option.
The Best Time To Get Universal Life
As with a whole life policy, the sooner the better is the general rule for when to purchase whole life if the goal is to build lots of cash value.
How Much You Will Pay For Universal Life
Because the nature of this policy type is to offer flexibility to the policyholder, your premiums will fluctuate as long as you have this policy type.
