It’s one of life’s hardest adult conundrums. While you want to be responsible and prepare for the future, thinking about buying life insurance seems a bit, well, morbid.
On the one hand, you want to protect your family and make sure they are cared for when you can’t do it. But it’s hard to plan for your own death too.
However, it’s a necessity of being a responsible adult, to look at life insurance and make sure your loved ones will have the finances they need when you can’t provide for them anymore.
Are you wondering what types of life insurance to consider? Which is the best option for you?
Read on to learn all about the different types of life insurance options and features of each so you can make a good choice for you and your family.
Types of Life Insurance
As you consider your life insurance options, you want to look at the features, how premiums are calculated, and what benefits you get from each.
Level Term Insurance
Level term insurance is a type of life insurance that is good for a period of time or term. When you purchase it, you agree to pay premiums, that will remain the same for the entire term.
If you died during the term of the insurance, then death benefits are paid out. Once the term on the policy expires, you will get no benefits.
When you purchase level term insurance, you need to decide on the death benefit amount. Typically, the higher the amount, the more the insurance will cost.
You also need to decide on the term, or how long you want the policy to last. Ranges are usually somewhere between 5 and 30 years.
Level term insurance is often selected for the time period when you have dependents who would need your financial support if you were to die.
Level term insurance is often more affordable than some other options.
The downside is that you could pay for the entire term, it could expire and you would receive no benefit. Sometimes insurers will allow you to renew, although that surely would include a change in rates.
Decreasing Term Insurance
Decreasing term insurance is similar to level term insurance. It is good for a term or period of time that you decide on when you purchase it. You set a starting amount for the policy.
The policy decreases in value over time. Often the premiums will go down over time too.
People often opt for decreasing term insurance as a protection to cover a large debt like a mortgage. So, if they have a mortgage and were to die, the death benefit should ideally equal what is due on the mortgage.
This allows families protection and assures they wouldn’t be straddled with a large debt.
Increasing Term Insurance
We all know things cost more now than they did say 20 years ago. Increasing term insurance addresses that issue.
It works like level term insurance in that it is good for a period of time or a term. It also works in the opposite manner of decreasing term insurance. Instead of decreasing in value over time, it increases.
This would prepare your loved ones for an increase in the cost of living over time. It would also allow you to plan for anticipated higher needs. Maybe your kids might be in college during the term of the policy.
Family Income Benefit Insurance
Family income benefit insurance is another type of term insurance. Again, it is good for a period of time. The key difference in this type of insurance is that instead of paying your beneficiaries one lump sum or death benefit, it pays them money over a period of time.
This can provide them with a stable income in the event of your death. The downside to this type of insurance is the term.
If you die close to the end of the term, they only get regular payments during the life of the term.
Whole-of-life is different in one key way from all the others already covered. Once you purchase whole-of-life insurance and you make regular premium payments, it is good until you die. There is no term expiration date on it.
This type of insurance tends to cost quite a lot more than term options. The benefit is that once you have it, it’s always there and you don’t have to worry about it expiring.
Whole-of-life policies also have some features worth considering. Many times, these policies offer an investment component. You can pay your premiums plus extra monies and they grow over time.
Some whole-of-life policies also allow you to borrow against them later on. Basically, you can use them to withdraw or borrow the money you have invested. Some people use this option to plan for college expenses, for example.
Other Insurance to Consider
There are a few other types of insurance that fall under the life insurance umbrella worth consideration.
Mortgage protection insurance allows you to buy a policy to protect against the cost of your mortgage expenses should you not be able to pay them.
Mortgage protection insurance can be set up in a few ways. You can get benefits for unemployment, illness, or death. Sometimes the benefits cover the monthly mortgage expenses if you are unable to pay them.
In the event of your death, there would be a lump sum payout that would allow the mortgage to be paid off.
Joint Life Policies
If you and your spouse both contribute to the family income, you may want to have a joint policy. This allows you both to be named in the policy. In the event, something happens to one of you, the other is protected.
This is especially important if you are both contributing income to the household.
Understanding Your Life Insurance Needs
While buying life insurance is tough to consider and even pay for, it gives you and your loved ones great peace of mind.
No matter what types of life insurance you consider and buy, you know your family is protected in the event you can’t provide for them.
Do you need more information on the types of life insurance? Are you ready to get a quote and sign up for a policy? Contact us today to get started.