Should you buy life insurance? Whom should it cover–you, your spouse, your kids? Term vs. whole life vs. annuities. In this guest post, Daron Skibosh sheds some much needed light on what can be a complicated muddle for a lot of us.
No one knows how long they will live. What is certain is events will happen which are positive and negative. Any type of change costs money, but the tendency in life is for negative events to cost more. That reason alone is why everyone should have some type of life insurance policy.
Two Types of Life Insurances
A person pays a set amount of money in an agreed amount time into a policy contract. The amount of the premium is determined by a set of criteria connected to life expectancy tables, common ailments, and age. Life insurance contracts come two ways: whole life insurance and term insurance.
Whole Life Insurance
Whole life insurance contracts come as a cash value policy. The contract has two parts known as the insurance part and the investment part. The insurance part in most cases states upon the death of the owner, a certain amount of money will be paid to the survivors. Most people use the money for funeral or medical expenses. The investment part works slightly differently. It accumulates a value over time and can become withdrawn or borrowed against.
Term Life Insurance
Term insurance contracts have a set amount of time created for the coverage period. The contract will have an expiration date and the policy owner must make the effort to renew or end the contract. No value other than the stated terms with the premiums becomes accumulated.
Life insurance policies offer money for balancing estates, a liquid asset for life changes, and of course the expenses of death. Upon receipt of the money, taxes, transfer expenses, debt or a source of income for survivors are the typical uses of the money.
Life insurance policies have other uses as well. Many policies are used to finance college educations. If inheritance issues crop up, then life insurance policies can equalize inheritances such as if someone does not wish to receive a part of a business or property. No issues arise if the money goes towards funding business plans or contributions to a charity. Many policy owners experience a disability long before their demise, so the policies give a good source of income to transition to a new career or lifestyle.
Before buying a life insurance policy of any type determine what one needs. Think about what the present policies one has covers and the life insurance needs to supplement. Also take a look at the family history for any patterns of chronic illness or common disabilities among relatives. Do a Web search on policies available. Prices and contract terms vary especially on whole life insurance policies. It is possible to find a policy that meets needs at a low price with some research.
By a policy when young if possible or continue a policy parents purchased. Rates are lower and often locked in, therefore more time for value to accumulate. Be honest when answering questions about health or family when trying to get a life insurance policy. If a large claim is filed insurance companies always investigate. Do not give them a reason to deny your claim.
Having pockets of money hid away for future use does make life a bit easier and gives more choices. Life insurance policies are one of the easiest and least costliest ways to do that.