Probably most of us understand how this whole life insurance idea works: you think in advance and pay regularly, so as to provide financial help for your family after your death. We also usually realize that it is worthwhile, since nobody has the ability to predict what can happen tomorrow. But there is yet another point in the topic which we should be aware of: we all need the right insurance products for our individual situations. And this is not so well-known and easy. This article will help you decide on the best life insurance option for you.
The essentials you need to know
Basic protection – if you would like to take care of your remaining family’s finances in case you suddenly die, think about term insurance. This provides coverage for a certain period of time and at a lower cost than it is in the case of other insurance types.
Market participation and cash value – choose permanent life insurance when you have more money to spend, you look for long term insurance protection and would like to have potential to build cash value (so that you can borrow money even during your lifetime). There are three types of permanent life insurances:
- Whole life insurance – here you build value which is based on a set schedule. Every year you can check your current cash value. If you take out money from your policy, the cash value and death benefit decrease.
- Universal life insurance – here you earn a fixed interest rate on your cash value. With the passing of time, the interest rate can change, but it cannot drop lower than a guaranteed minimum.
- Variable universal life insurance – in this option you are allowed to invest your cash value in the stock market. In this way, your policy value depends on your investments. In such policies the investment subaccount options are not sold for the general public.
How long do you need?
If you need life insurance for a certain amount of time (because you pay of your mortgage etc.), choose term insurance which is aimed at protecting you for a specific period of time.
This issue should be discussed with your agent in advance. Ask about any fees or charges before you make a decision.
Can I withdraw money?
Whole, universal and variable universal insurances usually give you the option of taking a loan or withdrawal. However, the conditions vary between companies so you need to find out what it looks like in the firm you have chosen.
Can payments be flexible?
Universal and variable universal products sometimes offer flexible payments option if you have already paid enough money to cover the charges of your policy.
Contact your local agent and ask about all you need to know. Choosing the right life insurance is very important for your budget and feeling of security. Check numerous options, companies and ask about smallest details. Remember that your life situation may change, as the market changes and your life insurance will probably need changes too.