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.