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Posted on: March 4th, 2014 by admin
In a world where money is tight we often find ourselves choosing between paying for the "must haves" and neglecting the "should haves." Life insurance, unfortunately, is a perfect example of this. We all know that we should have life insurance to at least cover our final expenses, but many of us don't purchase life coverage because it's just one more thing we'd have to spend our hard earned money on, and-let's face it-we've got a lot of other bills wanting our monetary attention.
Thinking about life going on after we're gone is a little scary, but the fact is that it does, and someone you love will be left with funeral and other expenses that they'll have to meet without you. Now, there are plenty of people who believe that their social security benefits will be enough to at least pay for their funeral, but the truth is that social security pays a death benefit of only $250-a far cry from the $6,000 average cost for a funeral today! On top of that, your loved ones will be left with mortgage payments and other living expenses. Life insurance is an excellent way to cover those expenses.
There are a few different types of life coverages available to meet your needs and budget. The two most common types are term life and whole life. But, which one is right for you? The answer is that the kind of insurance you should purchase really depends on your individual circumstances. To know which will work best for you, you must first understand the difference between the two.
Term life is exactly what the name implies-a life policy that ends after a specific period of time. Term life pays a death benefit to the beneficiaries you designate upon your death, but has no cash value. In other words, you can't "cash in" the policy or borrow against it prior to your death. Of course, the policy only stays in effect throughout the time period if you continue to pay your premiums in a timely manner.
People who purchase term insurance often do so with a specific purpose in mind. For example, an individual who has just taken out a sizeable business loan that he or she wouldn't want to leave a spouse responsible for might buy term life to cover the loan in the event of his or her death. Term coverage also appeals to those who want to offer their families some protection when they die, but who have a limited income that doesn't allow for the higher premiums of whole life.
At the end of a term life policy, you may be able to renew for another set amount of time. Your premiums may be higher for this next term due to your increased age or illness. You may also be able to convert the policy to a whole life policy at a later date.
Whole life also provides exactly what its name suggests-a life policy meant to cover you for your entire life. Again, the continuation of the policy is dependent on promptly paid premiums.
Whole life is more costly than term because it is a policy meant to last over a great length of time without a premium increase. In other words, even if you become terminally ill, your Whole Life Insurance premiums will not go up. With term life insurance, premiums remain constant only through the set time, but may increase at the end of the term due to attaining an older age and/or if serious illness arises; possibly preventing renewability.
Whole life is designed to meet your permanent needs, including payment for final expenses and adding to a nest egg that can be drawn on in times of need. Whole life does have a cash value that will grow over time and that can be loaned against. However, any loans taken on the amount will be deducted from the death benefit paid.
Whether you choose to purchase term versus whole life is really up to you and is entirely dependent on your unique situation.