which type of life insurance is best for you?
There are two basic types of life insurance: term and permanent. Term insurance is purely life insurance while permanent (aka "cash value" or "whole life") policies include a savings element.
You've probably heard lots of sales pitches and marketing hype regarding cash value polices, and other arguments about how term policies are the better deal. The truth of the matter depends on each persons individual situation.
Benefits of a Term Life Policy:
1. It's straightforward. If you die during the term of your policy your beneficiaries get paid -that's all there is to it.
2. It's inexpensive. You aren't paying anything extra to fund a savings account or cover investment fees. And because the market is so competitive for term insurance, companies have a huge incentive to keep prices low.
3. It's easy to shop for. With relatively little effort you can comparison shop and assure yourself of a good deal.
4. You pay only for what you need when you need it. You typically need life insurance coverage for a specific period of time (until the kids are out of college, for instance).
Benefits of a Permanent Life Insurance Policy:
1. Flexibility. A permanent plan can give you access to some or all of the premiums that you have been paying for in a way favorable to your taxes.
2. It's with you until you die. This type of policy coverage is guaranteed for your life with no out of the blue payment increases. A term policy will expire at a certain date, and a renewed policy could have much higher premiums.
3. Inheritance. Maybe the best reason for a permanent policy is to make sure your estate and investments don't get eaten up by the government. A permanent policy can provide peace of mind that your family and loved ones will be taken care of for the future.
Remember, the decision to buy a permanent or a term life insurance policy will depend on your situation, your age, your financial well-being, and other factors. If you are a young family with some investments to protect but not financially stable a term life policy might be a good idea to protect those investments and your family. However, if you are financially stable with considerable investments, it may be a better decision in the long run to purchase a permanent plan.