LIFE INSURANCE
APRIL 22, 2021
Choosing the right life insurance for your life
Life insurance is a contract between an insurer (insurance company) and a policyholder.
A life insurance policy guarantees the insurer to pay some money as written in contract to named beneficiaries when the insured policyholder dies. This is due in exchange for the insurance premiums paid by the policyholder during their lifetime.
Some people who may need life insurance are :
- Parents with minor children
- Elderly parents who want to leave money to adult children who provide their care
- Family that can’t afford burial and funeral expenses
- Adults who own property together
- Parents with special-needs adult children
- Young adults whose parents incurred private student loan debt or cosigned a loan for them
- Young adults who want to lock in low rates
- Married pensioners
When buying life insurance, there are essentially two kinds of policies: term life insurance and whole life insurance. Term life insurance only lasts for a specific amount of time (temporary) and expires at the end of it. Whole life insurance is a form of permanent life insurance and lasts your entire life, until you die.
There are more insurance plans that fall in these two categories, each has their own benefits and drawbacks that you should consider for your own best.
A life insurance policy generally has two components—a death benefit and a premium. Basically, term life insurance has these two components, but permanent or whole life insurance policies also have a cash value component
Because term life insurance is more affordable than whole life insurance, term life insurance is the best option for most people in general. But like any insurance product, there are also pros and cons to consider.
For term life insurance the pros are : no hidden fees, exclusions, or risks and you can cancel the policy before it expires without losing any value, therefore it is the most affordable option. While the cons are : coverage expires at the end of the term, so you’ll have to buy for a new policy or convert it if you still need insurance.
The pros for whole life insurance are : doesn’t expire, so you can keep it as long as you need it. The cash value component is useful for long term planning and force you to save for tour future. But the cons are :more expensive than term insurance – about 5 to 15 times. Due to the high cost, people often buy less coverage than needed or surrender policies early. You should also remember that there are other investments offer higher interest rates and last, surrender value of this policy changes with time, it’s not static.
Whatever your choice is, life insurance coverage is your effort to protect the people you love most. You can help secure their long-term financial future by putting a plan in place to cover expenses that would occur in the event of your death.
The funds can help your loved ones pay their living expenses, stay in their home and pay off debts. It can even also help send a child to college or cover their daily needs.
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