Life insurance is intended to supplement your income for your family in case of your death. Once you are in your twenties or decide to get married you may want to consider life insurance. Premiums tend to be lower when you're younger. Most jobs provide life insurance, but it is best not to rely solely on this policy. You may lose your job, and in doing so, lose your life insurance as well. When deciding on the amount of coverage needed, you may want to consider your family's situation. The funds from your policy need to cover your final medical bills, burial costs, and paycheck, in addition to your family's daily living expenses and long-term needs such as retirement and college expenses.
What is Term Life Insurance?
Term insurance provides death protection for a “term” of one or more years. Death benefits are paid if the death occurs within the covered period. Some term policies are “Convertible.” This means that before the policy expires, you may convert the term policy to a permanent policy without any medical examination.
What is Whole Life Insurance?
Whole Life insurance provides a level death benefit at a level premium. Although one may pay higher premiums than term insurance, premiums remain constant over the life of the policy for as long as one lives. Whole Life policies develop “cash value,” which is a separate account that accumulates cash value and can be used to pay future premiums or be borrowed against.
What is Universal Life Insurance?
Universal Life insurance is similar to Whole Life insurance in that it too, provides “cash value.” Universal Life insurance, though, gives you more flexibility to vary the premium payments or the policy benefit amount, as one’s needs change. The tradeoff for this flexibility is in the growth of the cash value.
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