When you’re shopping for insurance coverage, it’s vital that you make the best decision for your family. There are several different options that you can choose between. Each kind of plan has different advantages and disadvantages that you’ll need to consider based on your insurance preferences. There is no “perfect plan” that works for everyone.
The two main categories of life insurance plans are term insurance and whole life. Both of them are excellent options, but it’s important that you understand the benefits of each of them to ensure that you’re getting the best plan to meet your needs.
Term Life Insurance
The most common type of insurance is a term insurance plan. These policies are bought with a pre-determined expiration date attached to them, called the “term.”
Cheaper
The biggest advantage of a term insurance plan is that they are more affordable than other types of insurance coverage. Because these policies don’t provide permanent coverage, they are going to be much cheaper than other types, and the shorter the plan is, the cheaper that the premiums are going to be. If you’re looking for the most affordable insurance protection, term is the way to go.
Variety of Lengths
When you’re shopping for a term insurance policy, it can find a plan in just about any length. Most insurance companies sell them in 10-year increments, but there are a lot of companies that will sell you a plan in just about any length that you want. You can find a plan for 2 years to 40 years. You can buy one that matches the length of your life insurance needs.
Easier to be Approved
Once again, because term life insurance is not permanent, the requirements for these plans is going to be more lenient. The life insurance company will only have to look at the risk for the length of the policy, not guess the risk for the rest of your life. You’ll have a much better chance to get approved for a term insurance plan versus other types of coverage.
Whole Life Insurance
Whole life insurance is the opposite of a term insurance policy. These plans are a permanent form of insurance protection.
You’ll Never Lose Coverage
With a whole life insurance policy, you don’t have to worry about ever losing coverage in the future. As long as you continue to pay the monthly premiums for the plan, you’ll have insurance coverage. These plans will only expire once you reach the age limit for the policy, which is typically around 90. These policies are an excellent option for anyone that doesn’t want to worry about reapplying for coverage at any point in the future.
Cash-Value
Another unique advantage of whole life insurance plans is that they build cash value inside of the plan. The longer that you continue to pay the premiums, the more value is inside of the plan. You can use the cash inside of the policy to pay the monthly premiums or even invest depending on the type of plan that you buy.
Tax Advantages
As we mentioned, the longer that you pay the premiums for your plan, the more cash value is built up inside of your policy, but one of the other benefits is that the money grows tax-deferred, which means that it won’t be taxed until it’s withdrawn. The money is going to make more money without having the taxes taken out, which is going to maximize the amount of money that grows inside of the plan.
Term vs. Whole Life Insurance
Now that you know the advantages of each kind of policy, you’ll be able to make an educated decision about which is going to work best for you and your family. We know that buying life insurance is not the most fun purchase, but it’s one of the best that you could ever make for the future of your family.
You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the insurance coverage that your family will need if something tragic were to happen to you. Regardless of which kind that you choose, life insurance is one of the best safety nets that you could ever buy. The best way to ensure that you’re getting the best plan is to work with an independent insurance agent. Independent brokers can help you decide which plan will work best and they can bring all of the best insurance rates directly to you.
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I have a dumb question, because I really don’t understand whole life insurance.
If money is “building up inside the policy”, it sounds like your family gets more when you pass away. But if you die in year 5 of a whole life policy vs year 35, wouldn’t your family receive the same amount (face value)?
How is the built up money inside the policy a benefit?