Benjamin Franklin once said, “The only guarantees in life are death and taxes,” meaning life is full of the unexpected. So, in life, there are ways we try to protect ourselves in “what-if” scenarios, and insurance is one resource that provides both peace of mind and a layer of security against life’s surprises.
When it comes to life insurance, the insured is providing a financial safety net for his/her family and loved ones, so they don’t have to worry about paying bills, final expenses, or other financial responsibilities and burdens due to their unfortunate or untimely death. There are various life insurance coverages and different types to choose from.
Term Life
Term Life Insurance is one of the most popular and affordable types of insurance. It is a policy that lasts for a specific number of years, typically anywhere from 10 to 30. Term life insurance is often the cheapest option with these benefits:
- You pay lower premiums when you are younger.
- Beneficiaries receive larger death payouts.
- It can be converted to whole life insurance.
During the term you pay a monthly or annual premium, and in exchange, the insurance company pays a tax-free lump sum to your beneficiary. The negative aspects of a term life insurance policy include:
- It does not build cash value.
- It has no surrender amount if you cancel.
- If you renew it, your premium is adjusted based on your current age and health (which translates to higher rates).
Term life is temporary coverage, which you must re-qualify for at the end of each term, and it is difficult to qualify if there is a significant health issue. Term life insurance is the best option for people looking to provide their family with financial stability to cover any debts, such as a mortgage or school loans.
Permanent Life
Another type of coverage is Permanent Life Insurance, which provides lifelong coverage, if the premiums are paid. Permanent life insurance policies build cash value, and the premium dollars can contribute to the policy’s cash account while growing tax deferred. Over time the cash account can grow into a sizable amount that can be borrowed against, with tax advantages.
There are two main types of permanent life insurance: whole and universal. Whole life insurance provides the following guarantees:
- Premium payments never change or increase with age.
- Cash value grows at a guaranteed rate over the life of the contract.
Universal life insurance provides more flexibility:
- Premiums can vary, as the insured can raise or lower payments to keep coverage in case circumstances change.
- Even with a guaranteed interest rate, cash value may change over the course of coverage due to the premium flexibility.
- You can change the amount of your death benefit.
Life has no guarantees, but life insurance is one way to ensure your family is taken care of once you are gone. The professionals at Charles Leach will use their experience and knowledge to help you secure the best policy for you and your family. Contact us at 814-275-3224.