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A lot of people worry about taking care of their loved ones after they are gone. One of the best ways to relieve that worry is life insurance. But finding the right policy can be confusing. Here is some straight-forward information on whole life insurance and why it may be the perfect choice.
There are many reasons why folks get life insurance. Covering burial expenses and debt are the obvious reasons, but a policy can do much more. It can help leave a legacy, supplement lost income, and take some of the stress from a tragic situation. It is responsible to plan ahead for the inevitable, especially since no one can know for sure what the future will bring.
The two main types of policies are whole life and term. Term insurance is temporary for a specified time period. If the policy holder is alive and well once that time is up, the coverage is gone. All payments made are the company's profit. If there is a reason to have a large amount of coverage, for example a couple just taking out a mortgage or tackling a child's college expenses, a term policy may make sense. But the need for that large amount will diminish as the years go by.
Whole policies are just what they sound like, coverage that lasts one's entire life. There are guaranteed value policies that have a consistent payment and death benefit. There are also universal policies that can have part or all of the premiums paid partially invested in the stock market. These premiums can vary month to month. The death benefit for this policy will pay the same regardless of the cash value.
Cash value is like a piggy bank within a whole policy. It builds as premiums are paid and can be borrowed against in a time of need. If someone is still paying on their coverage, they can roll their cash value into a single-premium paid-up policy. The premiums can also be drawn from the cash value to prevent the insurance from lapsing.
A unique benefit to these policies are that they bypass probate. The entire estate, possessions, and pretty much one's existence get assessed a value after they pass away. There are taxes and lawyers fees that eat away at money intended to be passed on. But a life policy gets paid tax free directly to the named beneficiary. It is a wonderful way to preserve a legacy.
If that isn't enough, there are also attachments called riders that can be added to most policies. An accident rider, for example, will automatically double the death benefit if it is proven the insured died in an accident.
Health is a big factor in determining the cost of insurance. How much risk an individual takes, whether at leisure or in an occupation, can also make the premium fluctuate. Age raises the premium, another plus for getting whole coverage; after the term coverage ends, the now older person may pay considerably more for less insurance. Women's rates are lower than men's because they tend to live longer, giving them more time to pay.
The younger one is, the easier to attain and cheaper policies are. But it's rarely too late to pick up something that can mean so much. No one wants to be caught with nothing in place to benefit those left behind. In the grand scheme of things, it just makes sense to have whole life insurance. Protect the family, pass on an inheritance, and live life worry free.
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