- No comments
Ok, you have plenty of insurance on your vehicles, water toys, home, and business. You feel great and are ready to go another several decades. Now take a look around you. Are there people who rely on you for their financial security? If the worst happened and you were not able to provide for your family, what would they do?
The obvious answer is life insurance, but where to start? The television commercials make it all sound easy, but there are definitely pitfalls to blindly purchasing coverage.
The first thing you need to know is there are three different types of life insurance: Term, Whole, and Universal. This is important to understand.
Term is different from “whole life” or “universal life” in that you do not build up equity, or cash value. In term, you just pay for the cost of insurance based on your age. Most term policies are renewable on an annual basis, and premiums typically increase annually. Some have level premiums or a decreasing death benefit for a stated period — one, five, or 10 years, or even to a specified age.
Whole, or “ordinary,” life insurance is usually sold with a level premium. In the early years of the policy, the annual premium will be higher than comparable term insurance; but because its premiums are level, premiums may eventually be less than term. Whole life policies build up a cash value that consumers can withdraw or borrow against. There are many variations of whole life.
Universal life insurance is flexible in nature in that you can choose, within limits, the premiums you will pay and the amount of insurance you want. Both can be changed at a later date depending on the policy values and your financial needs.
As with any insurance decisions, it is best to talk to your insurance professional. Go over what you want to have covered and be sure everything will be.