Once you have a good idea of how much life insurance you may want to protect your loved ones in the event of your death, the next decision will be what type of insurance you may need to buy. Professional Benefit Solutions can help you decide what type of plan makes sense for you.
There are two basic types of life insurance – Term Life and Whole Life. They each offer advantages. What you purchase will most likely depend on your current age, what you are able to afford, the amount of insurance you need and the length of time you need to have the insurance.
For instance, if you have children who would have trouble attending college if something happened to you, you will want to build in college funds. But if your dependents are young adults, you would not need to add in college expenses and may need less insurance.
Or once your home is paid off, you may not need to pay for life insurance to enable your survivors to pay off the mortgage.
So, here is the scoop:
Term Life Insurance is generally less expensive per month than Whole Life. That sometimes means that you can afford more coverage. But Term Life is sold in increments of time. For example, you may purchase a certain amount of insurance and make monthly or quarterly payments for 10 years or 20 years and then the policy will end. Whatever you paid each month for the policy will stop and the benefit is simply ended. You will be older as well. If you want or need life insurance to cover other types of expenses, you will need to find a new plan and your rates will be higher for that policy because you are older But if you need a lot of insurance to pay for dependents to go to college, to pay off the mortgage and other large expenses like cars or credit cards, a Term Life Insurance policy may allow you to buy more coverage at a lower rate for that decade or two that you need lots of insurance.
Whole Life Insurance is generally more expensive, but it lasts a lifetime. With Whole Life, you decide how much coverage you want to buy and you pay into the policy for a set number of years. The older you are when you purchase it, the higher the amount you will need to pay and the fewer years you will have to get all those payments completed. That means that Whole Life is most cost beneficial when you purchase it as a younger adult. As you make payments, a portion of your money will go to the life insurance company and part of your payment will go into an account that will be invested for you. Should you die, your policy will pay the amount you contracted for directly to your beneficiary, however, if you survive, once your premiums have all been paid, your Whole Life Insurance policy could begin to pay you interest from your investment each month and it will stay in force until it is paid to your beneficiaries after your death. There are some people who use Whole Life Insurance as part of their estate portfolio.