The last thing anyone would like to think about is their death. Let alone planning for it. Unfortunately, it is part of life, and if you want to care for your family, even after your death, then this is something you must consider. It is essential to get some general knowledge about life insurance, as this will enable you to make an informed decision when choosing a policy.
The first thing you need to understand is that there are several different policies you can choose from. Everyone is different. Therefore the type of plan will depend on your needs, as well as your age and health status. We will break the kinds of policies up into two major categories, namely permanent life insurance and term life insurance.
Term life insurance policies are only valid for a specific period, and it is much more affordable than permanent life insurance. The term can be 1, 10, or 20 years The death benefit will only be paid out to the beneficiaries if you pass away during that period. Should you reach the end of this period still alive, your protection will end. With many insurers, you have an option to renew the policy at this time. This policy does not build up any cash value.
Permanent life insurance can be limited to a certain age, but mostly it covers you for the duration of your life. If it is a limited policy, the cash value of the plan will be paid out to you when you reach the specific age. Contrary to term life insurance, this policy builds a cash value. For this reason, you will be able to withdraw money from the plan to pay for some necessary expenses. The other great thing about these policies is that the value it builds is tax-deferred. However, this usually only applies when the insurance policy is in force.
Permanent life insurance can be divided into two kinds of policies, namely universal and whole life policies. The advantage of full life insurance is that the premiums are fixed. It will pay dividends under certain circumstances.
The premium payments of universal insurance can be changed by the policyholder. This can be an advantage if you suddenly have a change in your lifestyle, maybe due to a life-changing event in your life.
If you are interested in long-term insurance and life the fact that your policy will be building cash value over time, then permanent life insurance is perfect for you. The most prominent reason people instead buy term life insurance is that permanent life policies are usually more expensive. The final thing you should keep in mind is that your death benefit will be removed if you take out a loan against your policy.