What You Should Know About Life Insurance

Many people wonder why they should buy life insurance. After all, what good is an insurance payout when you aren’t around to enjoy it?

Life insurance is meant to help make sure that your family has enough money to get by when you pass on. The point of life insurance isn’t to protect yourself — it’s to protect your family’s future when you’re gone.

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But there are many kinds of life insurance. Before you buy a policy, you should know what you’re getting.

Two Kinds Of Life Insurance

There are two kinds of life insurance: term life and whole life.

Term life insurance only lasts for a set period of time. When the period expires, you take out a new policy.

Why would you want a life insurance policy that expires while you’re still living? Because it’s very affordable. For small monthly premiums, you can have a large amount of coverage for your entire working life.

If you were to die suddenly before you retire, would your family have enough money to get by? A term life policy protects against that risk.

Whole life insurance covers you until the end of your life - or until you decide to cash it in.

There are two values associated with whole life insurance: the face value of the policy, and the cash value. Face value is the amount returned when you die. Cash value is the amount returned when you cash the policy in. The cash value of a policy is usually much less than the face value.

Which Kind Of Policy Should You Get?

Term life is often the appropriate choice for people who are still in their working years. Some financial experts refer to this period of your life as the “accumulation phase” — the time when you’re making and saving money. A term life policy covers the risk that you’ll leave your family behind without a “nest egg” to take care of them.

When a term life policy expires, it usually costs more to renew it — as you get older, the risk that you’ll die during the term of the policy increases. So as you get older whole life insurance starts to seem like a better idea.

But many financial planners suggest sticking with term life insurance. They recommend saving money by buying a term life insurance policy, and investing the savings into a retirement plan. If all goes well, by the time your term life policy expires you will have enough saved and won’t need life insurance anymore.

Want to start comparing life insurance options? Use our free service to get connected with agents. Fill out a simple online form, and you’ll be contacted with free life insurance quotes.