You have a family now, and you’re either the breadwinner or you contribute substantially to your household expenses. Without your salary, they’d struggle. This is generally a sign that buying life insurance is a good idea. This probably seemed fairly straightforward to you until you sat down to actually make the purchase and ran into a slew of new terms and concepts. Should you get whole, term or something else? The points below can help you take control of your personal health journey and better understand your options so you can choose the right plan for you and your family.
Term or Permanent
If you’ve been looking around online, you’ve probably encountered all different kinds of vocabulary, such as variable and simplified and whole and universal. First, take a deep breath. There are two broad categories of life insurance: term and permanent. The former usually costs less and is for a specified amount of time. This is the choice many people make. Permanent life insurance does not expire until your death or you quit paying the premiums, but it offers some additional benefits and perks. It has a cash value. For term, you can choose from various periods, such as five-year, 10-year, 20-year or even longer.
Permanent Insurance and Cash Value
When you have a permanent life insurance policy, you can borrow against it. You can also sell it or cash it in. You don’t lose the premiums that you pay in. You can pull cash out if you need to later. This is an important benefit for some and can be a reason to choose it over term. You can review a guide about how to cash in if you need to for any reason, such as how to meet unexpected expenses when they come up.
Types of Permanent Insurance
Whole, universal, and variable policies are always permanent. A whole policy usually has fixed premiums although it can cost a little more than other permanent policies. There are different types of universal. Indexed universal links the value of your policy to the stock market while guaranteed universal lacks a cash value, so this is the wrong choice if you want the benefits of an investment. The value of a variable policy is based on mutual funds, bonds and other investment accounts.
How your permanent or term policy is underwritten affects what you’ll pay. These options apply to both term and permanent. For healthy individuals, fully underwritten is often the cheapest. It is based on medical information about you and your lifestyle. You usually need to have a medical screening as well. Another option is simplified issue whole life insurance. You may want this if you prefer a relatively quick and painless online process although you can be rejected based on the answers to some questions. Older people may want guaranteed issue. You cannot be turned down for this kind, but it can be costly and may pay lower benefits.
The above types are sufficient for most people, but you may want to look into other options. These include joint life (which insures two people), mortgage life (which pays your lender if anything happens to you), and accidental death and dismemberment (which covers accidents and such catastrophic injuries as loss of limbs, sight or hearing).