Figuring out if term or permanent life insurance is the right choice for you and your loved ones can be a hard decision. In order to make a good choice, however, it is important to understand what each of these polices and how they work.
Term life insurance is usually an affordable way to provide cash assistance to your loved ones in case of your death. This type of insurance coverage is meant to provide money to the policy holder’s family members or close friends to pay bills, education expenses, or any other costs that would have been paid for with the money that the policy holder currently earns. It is important to note, however, that there is no other coverage provided through a term life policy. If the policy holder is disabled, his or her family will not get anything.
Only upon the death of the policy holder will a term life policy will pay out a lump sum amount. There are a lot of different options for how much this amount can be. Some term life policies will only pay out a small sum of money; these policies are usually meant to help the policy holder’s survivors pay for that person’s funeral expenses. Usually, these policies are recommended to individuals who do not need to financially support their loved ones. Policies with bigger payout amounts are usually recommended to people with dependent children or other loved ones who need financial support.
The most important thing to note about a term life policy is that it only lasts for a pre-set period of time. In other words, term life policies are not meant to protect the policy holder’s loved one’s for their whole lifetime. The exact term length of the life insurance policy can be negotiated.
Permanent or whole life insurance, on the other hand, is meant to cover more than just the policy holder’s death. These insurance policies typically consist of a term life insurance policy that is combined with an annuity. While permanent life insurance typically costs much more than a term life policy, it provides a lot more services.
Permanent life insurance is designed so that the policy holder can get something back from his or her investment. These policies accumulate a cash value over their lifetime, and after a specified number of years, they will start to pay out to the policy holder. In the event of the policy holder’s death, they will pay out a lump sum to the policy’s beneficiaries. Some permanent life insurance policies even include coverage for disability.
Because these policies will eventually start to pay out, many people choose to use them as part of their retirement and/or long-term savings plan. These can be a good investment option for some people.
Deciding between both of these types of life insurance policies can be a difficult choice. Carefully consider if you are looking for just a policy that can protect your family and loved ones in the event of your death, or if you want to start an investment that can pay off later in life.