You want to support the important things in your life as best you can. The financial cushion you provide can often play an important role in your family’s security. But, what happens if you were to die suddenly? Your income would no longer be able to help your survivors.
In these situations, life insurance can prove a great benefit. Your policy can provide funds for your family to pay bills, settle debts or cover other costs. It’s often a good idea to enroll in coverage while you are young. Doing so will often qualify you for the lowest rates on your coverage.
Still, you have an important decision to make. There are two very common types of life insurance—term- and whole-life policies. Each policy functions differently, and might provide different benefits. How do you know which one is best for you?
Understanding Term-life Policies
Term policies don’t last forever. Usually they expire at intervals like 5, 10, 20 years and so on. One of the perks of this policy is that you won’t have to keep it forever.
Say, for example, that you only want to keep the policy until your child graduates from college. You might enroll in a term-life policy for 20 years, and then drop the coverage. Therefore, the policy will essentially cover you only while you need it. It will go away once you decide it is no longer useful.
Nevertheless, term policies have their drawbacks. To keep this coverage active, you have to renew it when the term expires, as well as pay the usual premiums. Your survivors can only claim a death benefit if you die while the term is still active. Only drop term life insurance if you consider your finances stable enough to do so.
Can You Benefit from Whole Life Coverage
If a term policy isn't what you want, consider a whole-life policy. These policies do not expire as long as you keep them paid, and often offer a few unique benefits. For example, they often accumulate cash value. Policyholders can claim this cash value, in addition to the original value of the policy. Many policyholders can even draw on the cash value as well during their own lifetimes. This is a valuable source of income that might prove useful.
Even so, whole-life policies have their drawbacks. For example, they might have higher costs than term policies. Additionally, you often have to complete a medical exam to qualify for coverage.
Therefore, when you decide to enroll in life insurance, talk to your insurance agent. They can likely help you decide on whether whole- or term-life policies better benefit you.