Term life insurance expires, and that's no secret. It may not be the best choice for someone who wants an insurance policy that lasts longer, but fortunately, permanent life insurance does not expire and offers a savings portion as a benefit.
Permanent Life Insurance
There are two types of permanent life insurance: whole and universal life insurance. The savings feature is what typically draws people in. It builds cash value over time, and the policyholder may borrow funds or even withdraw it for personal use. This could include paying bills or tuition.
Whole Life Insurance
This type of life insurance covers you for your entire life, regardless of how long that may be. Because the coverage includes a savings feature, you pay a premium higher than what you would pay for term life insurance.
As for the savings feature, the insurance company puts away a portion of the premium payment into an account with high interest, which allows the cash value to increase tax-deferred over time. This policy is worthwhile due to its guaranteed cash value and flexibility; you are able to borrow money against the cash value. You can also surrender the policy to get the cash value.
Moreover, some insurance companies offer policies that pay dividends. You decide whether or not you want it in cash, or you can let it accumulate interest over time. In addition, you can use the dividends to reduce the policy's premium or buy more coverage.
The setup of whole life insurance can help you fulfill personal goals that require money. Purchasing it at a young age is the best way to reap its benefits.
Universal Life Insurance
Also known as adjustable life insurance, this type of permanent life insurance offers a great deal of flexibility. You can increase or reduce your death benefits, and you can pay the premiums at any point, with any amount. This is subject to certain limits however and only applies after you pay the first premium payment.
Furthermore, you can increase the overall face value of your insurance coverage. However, you must pass a medical examination to qualify. You may also need to decrease coverage to the smallest amount, but doing so may result in surrender charges on the cash value.
You have two options when it comes to death benefits: an increase equal to the overall face value of your policy or a fixed amount. Both apply to the cash value amount for your policy.
The insurance company will disclose the overall cost for your insurance right off the bat so you have a general idea of how your future policy is going to work for you individually.
Before purchasing a life insurance policy, take into account your family's needs. Permanent life insurance offers a peace of mind in promising lifelong security, regardless of what happens. Whole life insurance can protect your beneficiaries and plays the role of a tool that accumulates assets over time, while universal life insurance gives you the opportunity to regulate insurance coverage. The decision ultimately depends on you and your family needs.