The Two Critical Types of Life Insurance and Which One You Need
Did you know that in 2018, about 60% of people in the U.S. had life insurance? Out of those, 1 in 5 say they don’t have enough coverage.
Are you wanting to get a life insurance policy but aren’t sure which is the best option? In this article, explore the different types of life insurance. Read on to discover whether term or permanent life insurance is right for you and your family.
The Two Types of Life Insurance
There are various life insurance plans, but they all fall under term or permanent life insurance. Permanent life insurance is one that lasts through your life and can have a cash value component.
When you’re alive you can borrow against or withdraw that cash component. Term life insurance is when a policy lasts for a certain number of years. If you outlive the policy, then it expires without receiving compensation.
Universal Life Insurance
When finding an independent insurance agency, you might hear the term universal life insurance. This is a type of permanent life insurance.
In this option, the premiums are flexible. You can lower or raise the amount you pay into your policy. If you decide to lower the amount you pay each month, it can cause you to pay more later on.
Whole Life Insurance
Whole life insurance is where you lock into the amount for the length of the policy. A part of the premium you pay goes into a cash value and increases over the life of the policy.
It’s similar to a savings account since over time you’ll increase cash value to it. Keep in mind that since your life insurance is about paying your beneficiaries when you die, you can wind up paying more for less insurance.
Whole life insurance costs more than term life. They also don’t accumulate as much cash value compared to putting it into a mutual fund.
Term vs Permanent Life Insurance
Even though it’s more expensive, permanent life insurance can be a safer option since it doesn’t expire. It’s also a way to make some money.
If you’re interested in permanent coverage with a savings option, then permanent insurance is for you. For lower premiums, choose term life insurance.
Keep in mind that it’s a temporary solution. There’s the option to start out with term life insurance and switch over to permanent.
You might also choose term life if there’s a financial burden you don’t want your family to get stuck with. Whether that’s paying off the house, other debts, or your children’s college.
Exploring the Different Types of Life Insurance
Now that you’ve explored the different types of life insurance, you should have a better idea which is the right option for you and your family. Would you like to read more money content? For everything from money to business, check out our other articles on our site today.