Life insurance can be an important part of your financial portfolio--one that can determine your family's lifestyle in the event of your death.
When considering life insurance here ares some important things to evaluate:
The Amount of Coverage You Need
You should decide what expenses you want to covered. This may include your income for a number of years, your mortgage, college tuition, outstanding debts, and even cash for your beneficiaries to use for investments or living expenses.
What Type of Policy Best Suits Your Needs?
There are several policy types to choose from including whole life, term life, universal, variable, and variable universal. Although you may decide on any of these policies, the two main types of life insurance are term life and whole life.
Term Life Insurance
Term life insurance provides a death benefit, and typically has term limits of 10 to 30 years. This is the least expensive life insurance, especially if you decide to purchase coverage before the age of 50.
The duration of your term life insurance policy should coincide with the financial needs of your survivors. For instance, if you know that your mortgage should be paid off in 15 years and that your children should have completed college in 20 years, and these are the only financial obligations you are concerned about, a 20-year term life policy might be a good match for you.
Term life insurance is also a good option if you are looking for cheap life insurance or low cost life insurance. Because mortality risk is calculated only for a specified number of years, as opposed to the entire life of the insured, term life is typically the cheapest life insurance available.
Whole Life Insurance
Whole life insurance is not only a life insurance policy, but also acts as a long-term savings account. Whole life is a good policy for you if you want life insurance coverage for your entire life.
A part of the premiums go toward paying the cost of insurance coverage, and another portion goes toward the investment savings account. The savings portion, or the cash value, plus interest accumulates in the account.
As the policyholder, you can access the cash value through a loans to purchase additional insurance coverage, or to cover future premium payments. If you do take a loan against the cash value, any unpaid loan balances are subtracted from the death benefit.
Other Important Considerations
A life insurance policy is a long-term proposition. Make sure to evaluate the terms and conditions of your life insurance policy before signing the contract. Remember the cheapest life insurance is the policy that best fits your needs and financial goals.
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