Life insurance is one of the essential decisions to make when planning for the future. This insurance product protects your family and loved ones after you pass away. If you are thinking of approaching an insurance agency with hopes of discussing your options, then you have come to the right place. There are many types of life insurance policies that can help you fulfill your goals, each of those policy options falls into one of two categories; term and permanent life insurance.
A term life insurance policy offers you coverage for a defined length of time, for example, 10, 15, or 30 years. If you die during this period, your family will be beneficiaries of the money held by the insurance company. However, you have the option to discontinue or renew your life insurance policy if you are alive and well at the end of the agreed period.
A permanent life insurance policy is a lot different from a term life policy. Here, you agree to life-long insurance coverage with your provider. The coverage comes with a cash value that will be paid to your loved ones upon your demise. Like many other financial instruments, people often use this insurance policy as a backup retirement investment for their loved ones. Permanent life insurance promises not only future yield but also offers other financial incentives along the line.
If you cannot decide which is right for you, you need to know as much as possible about each of the options and how they fit into your present and future plans. For clarity, the following section of this article will break down the essential things you should know.
The Basic Features of Life Insurance Policy
Life insurance serves as security for many people. They are essentially locking a part of their income away monthly to provide financial support for their loved ones when they are no longer around. The impact of this financial support cannot be quantified, and this is more reason why you should make the right decisions now.
Life insurance policies often come with some basic features that make them attractive. Some of these key features include;
The Death Benefit. This is the amount of money locked away in the insurance policy. After their death, this tax-free amount will be paid to the policyholder’s family.
The Beneficiaries. These are the people entitled to claim the life insurance payout upon the policyholder’s death. Beneficiaries can be a single person (a child, relative, surviving spouse, or others) or maybe a group of persons (a large family and relatives). The payout will be divided as stated by the policyholder between the beneficiaries.
The Policy Term. This is the time period agreed to by the policyholder and insurance company. Usually, the policyholder will be able to choose between permanent life insurance coverage and term life insurance coverage. Permanent insurance coverage runs from the time of signing the document until the policyholder’s death (unless otherwise stated). On the other hand, a term life insurance runs for an agreed period which can be 10, 20, 30 years, or more.
The Premium. This is the monthly or annual payment by the insured to keep the policy active and in effect. The Cash Value. This is the agreed amount to be paid by the insurer at the end of the policy. The amount offers financial benefits as it can be cashed out or borrowed against when in a financially difficult position. This is only applicable to a permanently insured policyholder.
The Different Kinds of Life Insurance Policies You Can Purchase
Term Life Insurance
A term life insurance offers life insurance coverage for a specified time. The timeframe for this kind of insurance coverage usually revolves around 10 to 30 years. This insurance coverage is unlike permanent life insurance because it doesn’t come with a cash value. However, it offers a payout to the designated beneficiaries should the policyholder die within the insured period.
For most term life insurance, the insured pays a fixed amount monthly or annually to service the product for the duration of the contract. One of the key disadvantages of this insurance policy is that its renewal usually comes at a higher cost. This is because the insurance company understands that a higher risk of death is involved within the renewal period. The insured can also decide not to renew the insurance policy at the end of the agreed term.
Whole Life Insurance
Whole life insurance is one of the most typical and simplest forms of permanent life insurance. For this policy, you enter into an agreement with a suitable insurance provider for the rest of your life. People who have active life insurance policies can also use this product as a financial backing for loans and other financial opportunities. The cash value accrued to this insurance policy increases over the years and is tax-free upon payment to the beneficiaries.
For a whole life insurance policy, three common defining characteristics are present;
The level premium is fixed for life.
There is a guaranteed death benefit as long as insurance premiums are paid.
The policy has an associated cash value that can be leveraged for short-term financial gains. The cash value also grows at a guaranteed rate.
There are many advantages associated with whole life insurance coverage. For example, the insured can benefit from their life insurance by borrowing money against the cash value of their insurance. Although it may take a few years for the amount to grow, it offers financial backing when all the chips are down.
People who are insured by a mutual company can also earn dividends from their whole life insurance policy. The dividends are paid as cash value and serve as profit to the insured. In some instances, the dividends can be reinvested into the insurance policy to significantly grow its cash value in a short time.
Understanding your options regarding insurance policies can significantly improve your chances of making the right decisions for yourself and your loved ones. If you wish to learn more about insurance policies and how they help, visit https://www.millerhanover.com
Miller Hanover Insurance
334 High St, Hanover, PA 17331
Contact Number: (717) 637-9265