It’s often difficult to choose the right type of life insurance. It depends on the policy’s desired length, whether you want to invest, and how much you are willing to spend each month. It all starts with understanding your options.
Understand Your Options
Before purchasing a policy, you’ll want to research how life settlements work. Suppose you ever want to sell your policy. In that case, you can use that info to get your estimate from the top brokers and providers of life settlement companies. A settlement involves selling the policy to a third party for more than its surrender value, but not as much as the death benefit. Getting a settlement might be a good option for someone who might otherwise let it lapse or surrender the policy. It’s also good if someone’s needs change. Still, it’s always best to choose the right type of insurance to start with.
If you’re looking for a simple option, consider a term policy. It gives coverage for a certain amount of time. You could get one for 10 to 30 years, depending on your needs. Since there is no cash value, its goal is to provide the beneficiaries with funds if you pass away. Many policies have level premiums, meaning you’ll pay a set amount each month. After the time is over, you no longer have coverage. Think carefully when determining how long of a term to get. If the policy expires, a new one may be more expensive since companies charge older people more.
Many factors go into determining how much insurance to get. Think about how long your family needs protection and go from there. For instance, you might decide to have coverage until your children have grown and you finally get a chance to live debt-free. It’s best to keep the insurance until there are enough funds for the surviving spouse. You might have the option of converting a term policy to a permanent one for some of the coverage time. If your employer provides it, the rates may increase as time goes on.
If you’re looking for permanent life insurance, a whole policy is a simple option. It gives coverage throughout your entire life. It comes with cash value, which means some funds go in a cash-value account. Over time, that amount grows, and if it is tax-deferred, you may not owe taxes on what you gain.
With whole life, as long as you pay the premiums, the death benefit is guaranteed, and the level premium stays the same during your life. There is also a guaranteed cash value that grows over the life of the insurance. There are several advantages of the cash value. While it takes a while to grow, you can borrow money against its value once it does. Or you might surrender it to live on once you have retired. Some companies let you earn dividends from the cash value, and with a portion of the profits, you can increase its value.