Life insurance is a topic that you probably don’t like to think about. The decision you make when it comes to choosing the best life insurance policy could potentially mean the difference between the peace of mind that your loved ones are taken care of after you’re gone, or your family struggling financially.
Life insurance also plays a part in accidents, like the kind where your loved ones would need to hire this San Francisco wrongful death attorney. Here are a few tips on how to choose the right type of life insurance.
What is Life Insurance
Life Insurance Policies are legally binding contracts between an insurance company and you, in which you agree to pay a fee, called a premium, in return for a commitment from the insurance company to pay a set amount of money to a person or persons, known as a beneficiary, of your choice upon your death. The money the insurance pays is known as the death benefit.
Other Reasons to Consider Life Insurance
In addition to your loved ones being secure financially after you die, there are other reasons to get life insurance. You will want to help your family pay for funeral expenses or unpaid medical bills or other debts that remain after you’re gone so that your family isn’t financially burdened. You may also want to consider leaving an inheritance, providing funds for college, or paying off a mortgage.
Term Life Insurance
If you need coverage for a specific period of time, term life insurance could be your best bet. Perhaps you have children and you want their college tuition to be covered in case something happens to you, it might benefit you to purchase a 20-year term life insurance policy. Term Life could also be a great option if you want your mortgage or other debts to be covered after you pass.
Another reason you might want to consider term life is if you need a large amount of insurance, but you have a budget that’s limited. Typically, this type of insurance only pays out if you die during the term of the policy. When the policy term is over, you have the option to renew or buy a new one. Term life insurance is less expensive and you typically don’t build equity through cash savings.
Permanent Life Insurance
You should consider Permanent Life Insurance if you want a policy to cover you as long as you live, regardless of whether you die tomorrow or live for many years to come. Another benefit of Permanent Life Insurance is that you can accumulate savings that grow on a tax-deferred basis. These savings can be borrowed against and used for many purposes of your choice.
The savings portion of the life insurance policy could be used to pay premiums on your life insurance in the event that you are unable to. Even if you don’t have the best credit, you will be able to borrow money from the savings, which uses the death benefit as collateral for the loan. In the event that you die before the loan is repaid, the insurance company pays itself before paying out your beneficiary.