Choosing the Best Life Insurance
On the surface, life insurance is a simple concept - pay a little today to protect your loved ones later on. Trying to decide which life insurance policy is right for you can be a bit more complicated, however. With so many different types of insurance products available, choosing the right policy can quickly become a confusing and often frustrating process. Having a basic understanding of the various life insurance policies available can help make the decision easier, and allow you to choose the policy that fits best with your long-term goals and your family’s budget.
If your primary goal is to financially care for your loved ones in the event of your death, giving your family the funds needed to cover funeral expenses, mortgage payments and bills, a term life insurance policy may be right for you. This is the least expensive option when shopping for life insurance. One of the major downsides to term life insurance, however, is that once the term ends, your life insurance also ends (or premiums increase dramatically). Term life insurance is not a permanent life insurance option, but can be a great way to protect your family for a specified amount of time (term), and is a good choice for individuals who need life insurance but are on a tight budget. Some term life insurance policies can be converted to permanent life insurance later on, but ask your agent about your options before you sign up. Unlike permanent life insurance, term life insurance does not build cash value.
If you decide permanent life insurance is a better fit for your needs, you’ll have three different types to choose from - whole life, universal and variable value. Whole life insurance builds value according to a set schedule, and you’ll know the exact cash value of your policy each time hit your coverage anniversary each year. Universal life insurance, on the other hand, builds value based on a fixed interest rate on the cash value of the policy. Interest rates on a universal life insurance policy fluctuate, but never fall below the guaranteed minimum interest rate. Variable life insurance allows you to invest the cash value of your policy in the stock market, which means the value of the policy can go up or down based on the performance of your investments.
Before deciding on a specific policy, make sure to ask your agent about any fees and charges that may be associated with the policy, as well as what payment plans may be available to you. If you’ve chosen permanent life insurance, you may also want to ask about any policies or restrictions that may affect your access to the money, so you know what to expect should a financial emergency arise that requires access to your policy funds. Keep in mind that your insurance agent’s primary goal is helping you find the life insurance policy that works best for your needs and situation, so feel free to put your agent’s knowledge to good use when choosing the policy that’s right for you.