Life insurance is vital to the financial well-being of your family after you’re gone. This can make choosing the kind of policy you need an overwhelming decision. But you can improve your knowledge with these term and whole life policy basics before you buy.
Why buy life insurance?
Life insurance allows you to “insure” your loved ones are provided for financially after you die. Your family will likely face the loss of your income, yet face added expenses like funeral costs, outstanding debt and potential outstanding medical bills. A whole or term life policy may provide the financial means to cover those expenses.
What is term life insurance?
Term life insurance provides protection for a specific term such as 10-, 15-, 20-, 25- or 30-years. Insurance providers consider your age and the needs you want to cover. If you die during that term, death benefits will be paid to your named beneficiaries.
The death benefit remains the same throughout the life of the policy. Also, your premium amount never changes. However, once the term is over, the policy expires.
Typically, with term insurance you can obtain a larger amount of death benefit for a lower premium, versus whole life insurance. This is a plus, especially if your significant other will not be able to maintain the household on his or her own.
What is whole life insurance?
Whole life insurance provides protection throughout your lifetime and not a just set number of years. In addition, a whole life policy accumulates a cash value over time and can be used for loans or withdrawals. The premiums on a whole life policy are typically higher than that of term life insurance.
Similar to a term life policy, the death benefit on whole life insurance remains level and the premium cost never increases. Also, a whole life policy payout could allow your family to maintain their lifestyle or pay for future expenses like college.
How do you decide?
Everyone’s needs are different. Consider your age and current personal situation when you discuss policy options with your provider. Also keep in mind how much insurance you can afford to buy. Once a policy is in place, be sure to schedule an insurance check up with your representative annually.
Article provided by Local Government Federal Credit Union.
The advice provided is for informational purposes only. Contact an insurance representative for additional guidance.