Buying life insurance can seem very daunting, but we are here to help you get started. First, it is important to understand the differences between life insurance and life insurance. Then we take a look at the return on premium life insurance, as it is a mixture of the two options.
Both types have their advantages and disadvantages. Long-term life insurance is affordable and uncomplicated, while the entire life insurance does not expire but is more expensive. The life insurance covers you for a shorter period, but it is cheaper and easier, while the entire life insurance can give you lifelong coverage and provide extra support during the pension. Regardless, after you leave, your family can use the proceeds of any type of insurance to cover funeral expenses, mortgages, college tuition, and other expenses. They are different and what makes them suitable for your financial scenario.
So, let's dive in …
Term Life Insurance is the easiest to understand and has the lowest prices. It covers you for a fixed period of time, such as 1
You choose the term when you buy the policy. Again, the usual terms are 10, 20 and 30 years. With most insurance policies, the payment – called the death benefit – and the cost or premium remain the same throughout the period.
When shopping for life:
- Choose a term that covers the years you will be paying the bills and want life insurance if you die.
- Buy an amount that your family would need if you were no longer there to support them. The payment can replace your income and help your family pay for services you perform now, such as childcare.
Ideally, your need for life insurance will end when the lifetime policy expires: Your children will be alone, you have paid for your house and you will have lots of money in savings to function as a financial safety net.
The whole life insurance is more complex and tends to cost more than term, but it provides additional benefits. Whole life is the most well-known and simplest form of permanent life insurance, which covers you until you die. It also provides a cash value account that you can use to make money later in life.
It provides lifelong coverage and includes an investment component called the policy cash value. The cash value grows slowly on a tax-deferred account, which means that you do not pay tax on the profit while they accumulate.
You can borrow money against the account or submit the cash policy. However, if you do not repay an insurance loan with interest, you will reduce your death benefit, and if you hand over the insurance, you will no longer have coverage. the simplest form of permanent life insurance. Here's why:
- The premium stays the same for as long as you live.
- The death benefit is guaranteed.
- The cash value account grows with a guaranteed interest rate.
Some whole life policies can also serve. annual dividend, which pays you back with some of the insurer's profits. You can take the dividend in cash, leave it in your account to earn interest or use it to reduce your premium payments, repay insurance loans or buy additional coverage. Dividends are not guaranteed.
Term Life vs. Whole Life: Cost Comparison
Lifelong insurance is cheap because it is temporary and has no cash value. In most cases, your family will not receive a payment because you will be living until the end of the term. The entire life insurance premiums are much higher because the coverage lasts a lifetime and the insurance has cash value with a guaranteed return on some of the money you pay.
Term Life Vs. Whole Life: Which to choose
Choose life expectancy if you:
- Only need life insurance to reimburse your income for a certain period, for example the years you raise children or pay your mortgage.
- Want the most affordable coverage
- Think you may want permanent life insurance but can not afford it. Most lifetime policies can be converted to permanent coverage. The deadline for conversion varies depending on the policy.
- Think you can invest your money better. Buying a cheaper life policy allows you to invest what you would have paid for an entire life policy.
Choose your whole life if you:
- Want to give money to your heirs to pay inheritance or property tax. By 2020, real estate worth more than $ 11.58 million per person or $ 23.16 million per pair is subject to federal property taxes. State inheritance and property taxes vary.
- Have a lifelong addiction, for example a child with special needs. Life insurance can fund a special trust to provide your child with care after you are gone. Consult a lawyer and financial advisor if you want to build trust.
- Want to spend your retirement savings and still leave an inheritance or money for final expenses, such as funeral expenses.
- Wants to compare inheritance. If you plan to leave a business or property to a child, the entire life insurance can compensate your other children
Although there are many excellent life insurance policies, you can ensure that you get 100% of your premiums back at the end of the term period of coverage never used.
You buy a return on premium life insurance, perhaps for a 20- or 30-year period. If you die during that time, your recipients will receive the death benefit. If you survive the policy, you will get back exactly what you paid in (without interest). The money is not taxable.
If you are still alive when the insurance expires, you will not get anything back with a regular life insurance. The premium is set for the entire insurance period – it would not increase every year, but if you live at the end of the insurance period, the insurance ends and the premium paid is often seen as a waste.
The return on the premium policy is similar to a regular life insurance, with the biggest exception that if you live at the end of the period, you have two choices what you can do with your insurance.
- You can choose to take the entire premium paid out during the insurance period in a one-time payment (refund) from the insurance company; or
- You can choose to use that insurance value (the accumulation of what you paid during the entire term) to purchase a fully paid insurance amount (called the paid insurance amount).
But everything has a price, right? The return on the premium policy is a more expensive alternative, but some prefer to get the premium back if they are still living at the end of the insurance.
As with all life insurance policies, it is important to understand each option. and decide which scenario suits you best. And that's what we're here to help you with. To learn more about life insurance, visit our resource center or contact one of our licensed advisors and we will work with you to find the perfect insurance for you.