There are several different life insurance plans available, and it may be challenging to choose the right one for your lifestyle and specific needs. I have written posts before such as ensure you are not over insured. It pays before you decide which type of life insurance to choose to decide an amount you want to be covered for. One you have that figured out, it can be a good idea to reach out to someone for help if you are unsure how to proceed. For example, consultants such as Chris Pivik can help you understand the medical issues for choosing the right life insurance policy that will give you peace of mind. The main aim is that your family should not experience financial hardship after you die. Some policies are valid for a short time and other build up cash value. Here are some guidelines that explain the different options and may help you make an informed choice.
Term Life Insurance
Term life insurance is for a limited time such as 10 – 30 years. The amount you pay each month, your premium, will not change throughout that time. At the end of the term, the policy becomes invalid. However, you may be able to extend it, but for an extension, you may have to pay a higher premium.
Term life insurance is the most cost effective insurance policy if you only need it for a specific time period. For example, if you want your children’s college education to be guaranteed, you may take a 20-year term. It is also a good option if you need a large amount of insurance, but have a limited amount you can pay per month. Because this type only pays if you die within the time limit of your policy, the risk is lower than for a permanent policy. This is why the premiums can be lower. Remember – term life insurance does not build equity or give a cash savings!
Permanent Life Insurance
A permanent life insurance policy, also called universal or whole life insurance, will be valid as long as you live. It will pay a benefit if you die next week or in 100 years. Whole life insurance also provides a savings element that will grow over the years and could be used as collateral for a loan. The savings is tax-deferred, which means you only pay taxes on it when you use it or on a predetermined date. Universal life insurance is flexible, so you can increase or lower your coverage as well as your premium over time.
How to Choose a Plan
The best life insurance policy may not necessarily be the cheapest. It will depend on your family’s needs. A universal plan may be suitable if you want coverage for a short period, but also want to build cash value that you can borrow against while you are living.
If you need estate planning to be part of your life insurance coverage, a whole life insurance plan may be the best option. This will help you transfer your wealth to your beneficiaries.
The only real help you get from term life insurance is a low monthly payment and financial help for your family if you die during the term of the policy. As mentioned, this is usually the best way to go for most folks because once your kids are on their own, the need for a bunch of life insurance drops off…
Once you evaluate your needs, you will also need to consider the cost. In general, the healthier you are, the lower your monthly cost will be. As mentioned earlier, consultants such as Chris Pivik, can help you navigate optimal insurance rates if you are in good health with a low-risk lifestyle to give you a better chance of getting a low premium payment. Some of the medical factors that are considered are your family medical history, if you smoke or have smoked in the past, and your cholesterol level. These factors will help determine how much you pay for life insurance.