The facts about term life insurance

If you’re considering applying for a life insurance plan, you probably know by now that there are several types of insurance policies you can choose. Not only does every plan have its own benefits and downsides, but it’s sometimes hard to understand what some of the legal terms mean and how could these reflect on your choice. When picking life insurance policy, the first thing you need to decide is whether you’re gonna choose term insurance or whole life. In this article, we’ll try and explain the principle of term life insurance and some of the pros and cons of going with this option.

Term life insurance means that you’re not getting a contract that is permanent, but rather limited to a certain amount of time. Different insurance companies offer different time plans that could vary from one year to 40 or 50 years. Unlike whole life insurance, once the contract expires, your family is no longer safe if anything is to happen to you. On the other hand, that’s why this plan costs way less money than whole life. Let’s see what are the pros of term insurance:

It’s much more affordable

This is probably the number one reason people go for term insurance, and it’s perfectly understandable. The monthly rates of the insurance policy vary from person to person depending on numerous factors, but the main point is that the cost of term versus whole life could be around 10 times less. If you’re not planning on spending a little fortune on your life insurance, sticking to term would be a good idea.

They’re flexible

With term insurance, you can get renewable and convertible life insurance policies. While you’re pretty much stuck with whole life insurance for as long as you live because the contract cancellation terms aren’t favorable, term insurance allows you to renew the contact every couple of years and to convert the policy into any other provided by your insurance company.

Premiums increase with age

The downside of term life insurance is that your premiums will increase as you get older. This is perfectly logical, as the odds of you dying increase with age, so don’t expect to pay the same rates you did when you were 30 when you enter your 60s. Depending on the type of your policy, some companies raise premiums on a yearly basis, while others do it after a certain amount of years that could vary from 5 to 30. People over 65 usually choose to switch to whole life because over that age premiums become unaffordable as they tend to go sky high.

It builds no cash value

The reason whole life is so expensive is that it not only offers a fixed amount of money paid to your heirs when you pass away, but also has an investment component in it. With term insurance, the amount of money your family will get is fixed, and there are no stocks or bonds that could be used to accumulate more money over time.

Picking the right life insurance

When choosing the life insurance policy, there are many factors you need to take into account, and it’s not an easy decision to make, especially when a wrong choice could gravely influence the quality of life of your family or heirs once you’ve passed away. There are many types of life insurance that vary from insurance company to company, but we’ll cover some of the main types you need to know about. We hope this helps to clarify the meaning and purpose of life insurance as well as the kind of policy you should be looking for based on your household and lifestyle.

Term versus whole life insurance

These two categories are the first thing to choose from, with the difference being pretty clear. With term insurance, you get yourself insured for a previously determined period of time, that could last from one year to a couple of decades, depending on the contract. The main reason to choose term insurance is that it costs way less than whole life, so if you’re on a tight budget but still want to keep your family financially safe in case of something unexpected, this is the option you should go for. Of course, in the long run it does pay off more to get the whole life insurance, but the issue is whether you’re financially stable enough to spend this amount of money at once, especially if you don’t have a stable source of income. The longer the period of term insurance you choose, the better rates you get at the insurance company, one year contracts being the least favorable of them all, so try and choose the longest period of time that fits your budget.

Whole life insurance, on the other hand, keeps you safe for the rest of your life, no matter how long you live. The fact it’s so expensive lies in the fact that it not only covers you in the case of death, but combines a savings component that enables you to invest in the future. This way you invest in stocks or bonds that are supposed to be paid off to your heirs once you’ve passed away, and even though insurance agents will present you with some plans that sound to good to be true and may look like the perfect way to secure your family financially after you’ve passed away, the real truth is that most these policies are a bad investment. There are many hidden expenses and other ways you get tricked into signing these policies when in fact you could get much more by going with the term life insurance that costs way less. Whole life insurance has several types of policies: universal life, variable life, and the combination of two. Universal life policy means getting flexible options in choosing the cost of premiums and adjusting the death benefit. Variable life enables you to choose where the premium is invested, while the variable universal combines the benefits of the two plans.

All about life insurance

Choosing the right type of life insurance can cause a real headache, and if you’re not well informed you might get overwhelmed by the amount of info, different types of policies and other factors. Most websites on life insurance tend to use legal terms that aren’t easy to grasp, so you might end up even more confused than before. To help you learn more on this subject, we’ve chosen some of the most important facts about this topic, and will try to give you as much info in a nutshell as we can, without complicating things too much.

First of all, what is life insurance and why would you want to get it? Imagine the sad scenario where you abruptly die for some reason, no matter how unpleasant that might be to think about. Do you have a family that depends on your paychecks? Any relatives you would want to be financially secured? There are tons of questions concerning this issue, even if you’re single and living alone. You have to think about details like who would take care of your pets after you’re gone, if you have any, not to mention the possibility that you have kids that will depend on your money to get through college…Let’s stop here with possible scenarios and focus on your current lifestyle to determine whether you need a life insurance to begin with.

If you’re single or living in a household with two incomes where your pay makes one half of it, there’s not much to worry about, if there aren’t any other household members dependent of your income (like children or your 90-year-old granny). In this case, if you’re thinking in advance, all you need to make sure is that you save enough to cover funeral expenses, and life insurance isn’t something you should get at all costs. In the case you’re a lucky owner of a big estate, it would be nice to save up an amount to cover estate tax expenses once you’re gone and your heirs get it, to avoid leaving them head over heals in debt while trying to pay them off. Other than that, there’s nothing to worry about.

On the other hand, let’s imagine a completely opposite scenario. You’re the only one with a steady income in a family of five, with three little kids to take care of while your spouse is staying at home and taking care of them. In case you suddenly died, they would be in a lot of trouble. That’s the main reason one should get a life insurance – to make sure their family and loved ones are financially safe no matter what. If you fall in this group, it’s time you seriously think about getting a life insurance and start asking around for the kind of policy that suits your needs the best at your bank. Planning ahead might not be the most pleasant thing to do, but your heirs will be grateful that you thought of them in advance.