Life Insurance

6352802_sThe goal of having life insurance is to protect your family members (or other beneficiaries) in the event that you pass away.

Yet, there are many different goals for having a life insurance policy, depending on what stage you are in life. For example, if you work and have young children a policy helps your family maintain the same (or similar) lifestyle should you meet die while your kids are young.

And if you are nearing retirement age a life insurance policy can help transfer your assets to your children because life death benefit from life policies is tax free.

So the TYPE of policy and the REASON for getting a policy may vary depending on a number of factors, such as:

  • income replacement
  • mortgage protection
  • estate planning

So though life insurance is generally pretty easy to understand, getting the right policy starts with the type of protection you’re looking for.

Types of life insurance policies

Getting the right policy comes down to understanding the different types of policies available.

Generally speaking, there are two main types of life insurance:

  • Term
  • Permanent

A term policy provides you with a life insurance policy for a guaranteed premium payment for a set amount of years. A permanent policy, on the other hand, provides you with a life insurance policy with a guaranteed premium payment that will not typically increase for as long as you have the policy.

Permanent life insurance comes in three variations:

  • Universal life
  • Variable life
  • Whole life

Term life insurance

As the name suggests, term life insurance covers you for a set period of time for a set premium payment.

And once your “term” is up the premium payments become so high that it doesn’t make sense to keep the policy. So why settle for term? This type of life insurance is perfect for people with young children who need a lot of insurance coverage for a very affordable monthly premium.

In fact, it’s very common to be get a million dollars of life insurance coverage for only a couple of hundred dollars per year.

The factors that affect the cost of a term policy are:

  • length of term (10 years, 20 years, etc.)
  • your health
  • the amount of coverage you’d like to get

Permanent life insurance

Unlike term life insurance, a whole of life insurance policy will cover you for the rest of your life.

This typically means that your premium payment will stay the same once you get your policy, and will not increase as you age.

What’s more, this type of life insurance policies will build a cash value over time. And as the amount increases you can choose to borrow from your policy or cash out the policy. There is a risk with any investment, that the value can go down as well as up. If the pool of money is invested poorly, the investment could decrease in value and you might need to inject more money in order for your policy to continue at the same level of protection.

In fact, the 3 types of whole life policies all build a cash value, though the way they do this varies.

The important thing to consider is that this type of policy is suitable for estate planning and passing on a tax free inheritance to your children (or other beneficiaries).

The factors that affect the cost of a permanent policy are:

  • your age
  • your health
  • the amount of coverage you’d like to get
  • how your cash value builds over time

The premium payments for these type of policies are much more than term insurance. It’s important to remember that it’s best to get a permanent life insurance policy when you are younger and healthier, since this will keep your premium payments lower.

Which type is right for you?

Getting the right policy is really dependent on the reason for getting coverage in the first place.

At the end of the day, it makes sense to speak with a knowledgeable agent who can get an understanding of your financial situation and who can recommend the right policy for the best possible price.

Get a life insurance quote today

Save time and aggravation with a free, customized quote today. It only takes a couple of minutes so why not enjoy peace of mind by getting the coverage you need.

Get your FREE, no-obligation Philadelphia life insurance quote today.