Life insurance may not be the most exciting topic of conversation, but it is an important aspect of your financial security. Not only can it cover unexpected situations, such as medical expenses or funeral costs, you can even use it to help pay for your children’s education or pay down your mortgage. The less financial burden, the better.
Not everyone has the same situation, and fortunately, there are three basic different types of life insurance to meet your needs. Let’s review what’s out there:
- Term life insurance: This type of life insurance expires after a set amount of time, such as 10 or 20 years. It does not accumulate any equity, meaning that if you cancel the policy, you will not receive its cash value. This type is useful if you need a set amount of insurance for a set amount of time but your budget is limited. The premiums tend to be fixed for the length of the term, making it easier to budget for payments.
- Permanent life insurance: If you need insurance for a long time, or as long as you live, consider permanent life insurance. Not only can this type of insurance pay out a death benefit, but you can also generate and then borrow its tax-deferred funds. Your death benefit will act as collateral if you borrow from your insurance. If you cancel your life insurance policy, its cash value will generally be returned to you.
- Universal life insurance: This type combines term insurance but with an option for tax-deferred savings. Generally, it offers lifetime protection, but you can choose your payments remain at a constant level, that they increase, or a combination of these two options. You can also select that any payments you make that exceed the cost of your insurance can be invested.
While every type of life insurance has its advantages, make sure you obtain detailed information about each one, and ask a qualified insurance professional when you need clarification. Making the best choice for you and your family is the optimal way of ensuring you are protected against the unexpected.