Know Your Life Insurance Options

Buying life insurance is one of the biggest financial decisions of your life. It is also one of the scariest. For this reason, it is common for people to put it off.

Although you have the right to opt against purchasing a policy, this may not be in the best interest of you and your family.

Remember this: without a life insurance policy, your family may face extreme financial hardships should you pass away.

Before we take a closer look at the three most common types of life insurance – term, whole, and universal – here is something you need to know:

Life insurance policies fall into two primary categories:

  • Term life, which provides a death benefit for a predetermined number of years. There is no cash value.
  • Permanent life insurance, which provides a death benefit regardless of when you pass on. There is a cash value associated with this type of coverage.

Three Types of Life Insurance

San Angelo Life InsuranceAt this point, let’s take a closer look at the three most common types of life insurance;

1. Term Life

Since this is the simplest and most affordable type of life insurance, it is also the most common.

Term life insurance coverage is typically available for predetermined periods such as 5, 10, 15, 25, or 30 years. As long as you continue to pay your premium in full and on time, your policy cannot be cancelled.

While it is true that term life insurance is most affordable, it is important to note that when the “term” expires you will be left without coverage. At that point, you will have to purchase another policy if you desire to have coverage into the future. Since you will be older, there is a very good chance a new policy will be more expensive than the one that recently expired.

From small policies, such as $25,000, to those that are $1 million or more, this type of life insurance is flexible in terms of the death benefit.

2. Whole Life

If the thought of your coverage expiring after a set period of time bothers you, whole life insurance may be the answer. This type of coverage offers permanent protection as long as you continue to pay your premium.

Another difference, when compared to term life insurance, is that whole life insurance gains a cash value over time. At first, your cash value will build slowly but as you continue to pay your premium it will quickly gain ground.

At any point, you can withdrawal your cash or take a loan against it. That being said, if you don’t pay the money back before you pass away the death benefit paid to your beneficiary will be adjusted accordingly.

It is much easier to plan for the future with a whole life policy, since you know your coverage will stay active as long as you continue to pay the premium.

3. Universal Life

This is also a type of permanent life insurance; however, it is not exactly the same as a whole life policy.

Generally speaking, the primary attraction to universal life insurance is the flexibility.

Once you make your initial payment, you have the right to increase or decrease your death benefit as you see fit. Along with this, you can pay your premium in any amount at any time as long as you meet the minimum thresholds set by your insurance company.

Depending on the insurer, you may be able to structure universal coverage in the same way as term life insurance with a level premium and death benefit guaranteed for a particular period of time.

Any excess payment will be credited towards the cash value of the policy. From there, the cash value will gain interest while also paying the premium as well as any other fees. With this in mind, there may be months when you don’t make a payment. Since you have a cash value, you are not required to do so unless there is a minimum requirement in place (see above).

Has all this information confused you? If you life in the San Angelo area and  have any questions or are interested in discussing your current situation, contact us for a free life quote at your earliest convenience. We can help you buy the right policy at an affordable price.

Still not sure if you need life coverage?  Check out the video below…

Also See: What To Do After a Car Accident

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