Like all insurance, life insurance provides you peace of mind knowing that anyone who depends on your income will be taken care of financially if you pass away. However, it can be difficult when assessing various quotes to figure out which life insurance carriers are offering you the best life insurance policies. Here is some basic information that can help you understand the difference between the two major kinds of life insurance coverage:
Term Life Insurance
Term life insurance is similar to auto or health insurance in that it’s only good as long as you keep paying your premiums, and you only get a financial benefit from it if you need to make a claim. Insurance providers offer policies of many different lengths, and the length of the policy you need will probably depend on the reason you’re buying insurance. If, for example, you simply want to make sure that your daughter will have enough money to finish college, then you can choose a policy whose end date coincides with her graduation year. But if you have a more long-term goal, such as ensuring your stay-at-home spouse will be covered in case you die unexpectedly, you might want a policy with a longer term.
Often, the best life insurance policies will include a guaranteed renewable rider. This allows you to renew your insurance without having to go through medical testing and rate adjustments every single term. Aside from that, the primary factors to consider are the premium (the amount you’ll pay for coverage) and the death benefit (how much will be paid out to your beneficiaries should you die).
Permanent Life Insurance
Unlike term life insurance, permanent life insurance can be a good investment even if you never make a claim. This is because in a permanent or whole-life insurance plan, part of your premium goes into an investment account, adding up until it reaches the face value of the policy. This is your money, and you can use it for many reasons throughout your life. Normally, you can even borrow against this account tax- and interest-free.
Permanent life insurance is typically more expensive than term life insurance would be (especially when you’re young and healthy, meaning you could get very low term life insurance rates). However, the upside is that premiums won’t increase over the course of your life.
Do you have any tips to share on deciding which are the best life insurance policies for various situations? Add your thoughts in the comments.