Life insurance can give your family financial security after you pass away. Having life insurance is particularly important if you have loved ones who rely on your income. Here are some key things to know about the different kinds of policies that are available.
Term Life Insurance
A term life insurance policy provides coverage for a specified length of time. If you die while a policy is in effect, your beneficiary will receive a death benefit. If you live beyond the term of the policy, you and your family won’t receive any money from the insurance company unless you select a return-of-premium policy.
A term policy can help your family cover a mortgage, other debts, living expenses and your children’s college education. You can select a policy with a term that fits your needs. For instance, you might want insurance that will last until your mortgage is paid off or until your kids finish college.
If you’re on a tight budget, a term life insurance policy can be a good option. Since it will only pay out a death benefit if you die during a specific period of time, it will have affordable premiums.
Permanent Life Insurance
Permanent life insurance will last for the rest of your life and will pay your beneficiary when you die, as long as you keep up with the premiums. Many permanent life insurance policies build cash value that you can withdraw from or borrow against. That can give your family financial flexibility if your circumstances change in the future.
Whole life is one type of permanent life insurance. It has significantly higher premiums than term life insurance and pays a guaranteed death benefit.
If you want more flexibility, you can choose a universal life insurance policy. This is another type of permanent life insurance that will let you adjust your premiums and death benefit.
Find the Life Insurance That’s Right for Your Family
To select a life insurance policy, think about your priorities and objectives. Consider your family’s total annual income, the balance you owe on your mortgage, your other debts, the ages of your children and how much you currently have in savings.
Life insurance premiums can vary significantly depending on the type of policy you choose, your age, your gender and other factors. Rates also differ from one company to another. You’ll have to shop around to find the coverage you need with the lowest premiums available.
If you aren’t sure which type of life insurance policy would be best for you, consult a financial planner. A professional can discuss your family’s circumstances and your goals and help you find the right coverage for your needs.