2 Basic Types of Life Insurance You Should Know
You are about to embark on a journey to create a more secure life for you and your family. The mere fact that you are researching about the basic types of insurance means that you do want a more financially stable life.
Assuming that you have already set your personal requirements and plans concerning your finances, determining what life insurance plan to get can now be much easier for you. Before you head out to your friendly neighborhood insurance agent, it is important that you do thorough research. That way, you’re sure that you are on the same page with your agent when you start discussing your insurance options.
Basically, what you need to know right now is the basics of life insurance. You can start off by understanding the two basic types of life insurance that you can choose from.
Term Insurance is primarily characterized by its relatively cheap rates compared to other types of life insurance. Its low premium rates are due to the fact that it has limited benefits and termed coverage.
You can go for a term insurance plan if you want to ensure financial security during your prime years, but your budget may be limited at this point. This is actually a common scenario because a lot of people nowadays are more open to getting insurance even when they have just started working. Term insurance creates that balance between affordability and significant financial coverage.
Another good thing about term insurance is that it is convertible and renewable. This allows you to be more flexible with your insurance options. For instance, if you are 30 years old, want to be covered by insurance and have limited budget, you can go for a term insurance that covers you up to 20 years. When you turn 50 and your insurance expires, you can renew it to cover for more years, perhaps until you are 80 or even up to 100.
When you finally decide to go for a term insurance, confirm with your financial advisor whether the insurance product that the company is offering is convertible. If so, determine up to what year you can have the policy extend and for how much. These are important questions to ask before you sign any application and undergo the whole process.
Whole Life Insurance
In essence, whole life insurance is the opposite of term insurance. Whole life insurance, or permanent life insurance, can cover you up until 100 years old, usually has a fixed face value and is generally more expensive.
If you are at a point where you’re planning for your financial future, this type of insurance product is perfect for you. Since it covers practically the rest of your life, you can use it to ensure that your financial responsibilities are covered even if you pass. A good example is when you want to deal with your estate.
When you die, everything you own is subject to tax before it goes to your beneficiaries. Estate tax is then imposed, and you will not be there to pay it. Yes, your property can cover the tax. However, you would not want that to happen because it lessens the value of what should go to your family. This is when whole life insurance comes in as the benefits from the insurance can cover the tax without tapping the assets at hand.
Whole life insurance also has different types under it. There are universal life insurance, variable insurance and VULs. Ask your insurance agent about these other options as they address various situations that you may be in. The bottom line is that whole life insurance fits those who are looking for more benefits in the long run and are ready to invest in their security today.