As soon as someone suggests that you should buy life insurance, you probably get that uncomfortable, sinking feeling in the pit of your stomach and for lots good reasons. First, life insurance makes you look at the inevitable, which is that you are not immortal - everyone dies. Next, life insurance is probably one of those things that you know you should buy but really don’t understand it enough about it to make you feel comfortable about buying a policy. And finally, life insurance cost money, and who has extra money to spend these days? Sorry to say that this article cannot help you with your mortality, however, it will explain some of the fundamentals of life insurance, and help you feel better because there is such a thing as cheap term life insurance.
The two basic types of life insurance are: term life insurance and whole life insurance. You need to understand the fundamental difference between these two types of policies in order to decide which is right for you.
Term life insurance is only life insurance coverage - straightforward, plain and simple. Term policies can be written for period of time ranging from a couple years to 30 years or more.
Whole life insurance adds an investment component to a term life insurance policy. These investments can be stocks, bonds or money market investments. Whole life insurance policies have a cash value that can be borrowed against. These policies are not expensive since investments are involved.
Which kind is right for you? If the decision is based on cost only, then go with term life insurance. Term life insurance is almost always less expensive than whole life policies and most
medical insurance policies also. Term life insurance carries very little risk. Today’s rates are low, but are expected to creep up in the near future. When you buy a policy you lock into the rate, so buying now guarantees you the low annual premium for the term of the policy, similar to locking in a low interest rate on a mortgage.
There are many reasons to buying term life insurance today, as opposed to waiting a few years. Premiums for life insurance will be less expensive if you buy before you are 50 year old and if you are in good health. Premiums get more expensive as you get older and many insurance companies will not sell insurance to anyone over the age of 65. This is one of those instances where spending money today can save you money tomorrow. Smoking also factors into the cost of the policy. Life insurance is less expensive for non-smokers.
A whole life insurance policy is like a forced investment plan. The policy’s premium is invested. There are fees and commissions that are associated with these investments that add to the expense of the plan and reduce its profitability. Generally, these policies have to be held for a long period of time (over 20 years) for them to be profitable. There are times where whole life insurance policies can be good investments, but the costs associated with these policies often make less profitable than other investment options.
Whether you decide on a term or whole life policy, life insurance is a way to take care of your dependence after your death. Spend the time, effort and money to protect those you love and care for after you are gone. This is not a time for skimping and trying to save money. Besides, it is easy to find cheap term life insurance. Do a little research, do the right thing and get a life insurance quote today.
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