Life insurance is a wonderful tool that spares your loved ones some of the pain of losing your income and support. But as with insurance options, the terminology can be confusing to many people. Complicating matters, life insurance comes in two basic forms that have many different names and different degrees of coverage. The question most people ask is whether they need term life or whole life.
The most basic definitions are the simplest: term life lasts for a specified term of your life; whole life lasts for the rest of your life. In both policies, your beneficiaries receive your death benefit when you die. The main differences lie in the duration of the two forms of life insurance and some of the built-in features available.
But term life is generally aimed at younger consumers, and often those customers outgrow their term life policies. If you buy a policy at 25 and name your parents and your spouse as beneficiaries, you can later change the policy to include future children, but the overall terms will remain the same, your designated beneficiaries would end up with fewer benefits from your life insurance policy. Consequently, some term life policies allow you to switch to whole life down the road.
Term life comes in two basic forms: level term life and decreasing term life. Level term life is more popular because the death benefit stays the same throughout the policy’s time frame. In decreasing term life policies, the benefit decreases over the course of the policy, most commonly in one-year increments. As with most insurance policies, the premiums you pay are not refunded if you make no claim during the course of the policy
Also known as permanent life insurance, whole life policies pay out death benefits if you die tomorrow or years from now. Whole life also allows you to build equity in the form of a savings account. Whole life insurance is available is three types of policies, each with their own variations.
Having multiple life policies offers consumers more flexibility and more opportunities to save on overall costs. This is possible because multiple policies do not cancel each other out. Rather, they work together to better meet your individual needs. Life insurance is available is so many forms that it can fit your current financial situation and whatever your situation may be in the future. If you have any questions about your current policy or other options, make sure to contact us.