Are you trying to figure out how to choose the best life insurance? Read this article for an easy guide to life insurance.
Finding an easy guide to life insurance can be challenging when agents start dipping into the jargon terms that make the average person’s eyes glaze over in boredom. That creates an apprehension that may be at least partially responsible for the fact that 40 percent of Americans have no form of insurance whatsoever.
Others are underinsured. In the following article, we hope to demystify this so you can make the best decision for your family. Let’s get started!
Whole Life Insurance
Any worthy life insurance guide must begin with a discussion of whole life insurance. Many consider this the best type of life insurance product to purchase. It guarantees a death benefit and doubles as an investment with benefits while you are still living.
A “death benefit” is the number one reason why you purchase life insurance, so understanding life insurance requires an understanding of how this operates. The death benefit is an amount you want your loved ones to receive when you die. A whole life policy will guarantee the amount you decide goes to your beneficiaries at that time.
Another element of learning all about life insurance means learning how cash values work on a policy. In short, you pay a monthly premium to keep the policy active. As long as you do so, the policy will build cash value in a certain amount (less than the death benefit), providing you with liquidity you can withdraw or borrow against.
PUA Life Insurance Rider
Paid-up additions, or PUA life insurance riders, are separate from whole life policies. We include them here because they can be added onto a whole life policy, thus increasing the amount of the death benefit payout and cash value.
Term Life Insurance
Obviously, whole life insurance policies have a lot of benefits. They provide the best of both worlds in terms of a safety net and an investment. You can’t learn about life insurance completely, though, until you become familiar with the two types of term life insurance policies.
The first is a traditional term life. These policy types pay a death benefit provided that you die within the active term of the policy. They do not build cash value and are essentially worthless if you survive beyond the end of the term life period.
The major benefit of them is that they are much less expensive. This allows you to purchase a higher death benefit for much less money.
Convertible Term Life
The second type of term life insurance is a convertible term life policy. These are purchased as traditional term life. That means you get a guaranteed death benefit provided that you die within the policy terms, but they do not build cash value.
However, you may convert them to whole life, reaping the benefits of the higher death benefit and cash value without having to go through the medical underwriting process. The ability to convert usually comes with an age-limit cutoff of 48-50 years old. See the policy specifics for more details.
This Easy Guide to Life Insurance Will Help You Choose the Right Option
We hope this easy guide to life insurance has given you some idea of which option is the best one for you. If you need something secure and guaranteed and you like the investment aspects of cash value, whole life is the way to go. If you’re on a budget and just want to make certain your loved ones are taken care of if you die in the next 10 or 20 years, consider term life.
Life insurance isn’t all you need to prepare for future uncertainty. For more sound tips on leaving a legacy for your loved ones, check out more of our estate planning information!