(FinancialHealth.net) – Purchasing life insurance is a necessity if there is anyone who is dependent on you for their support. While many think that those who have children are prime candidates for life insurance, even people who are childless can benefit from the security that life insurance brings. Buying life insurance provides your pets, disabled siblings or ailing parents with the means to have their needs met even if you aren’t there to personally oversee them.
Choosing Between Whole Life and Term Insurance
One of the first choices you’ll need to make about life insurance is the type you plan to buy. With two main types — term and whole life — choosing the right one is important if you want to meet you financial goals.
Term life insurance tends to be the most affordable option. Sometimes referred to as “pure life insurance,” its purpose is to provide your dependent with protection if you die within the term period. When you purchase this type of life insurance, you choose the term with 10, 20 and 30 years being common choices.
It’s important to choose a term that encompasses the time frame in which you’ll need to pay bills. Carefully consider the amount of life insurance your dependents would need to adequately replace your income as well as purchase any needed services like child care. Regardless of when you die during the term period, the payout on term life insurance is the same.
Whole life insurance is a permanent life insurance policy. While permanent life insurance is more complex than term, whole life is the simplest. Whole life insurance provides you with an investment component. Known as cash value, this portion grows slowly and you won’t pay any taxes during that time. You can borrow against this cash value but you’ll need to repay it — with interest — or your death benefit could be reduced.
Even though whole life insurance is more complex, it offers some benefits that help offset this. Its cash value grows at a rate that is guaranteed. In addition, the death benefit is guaranteed by the policy. Finally, the premium for whole life insurance remains the same, regardless of how long you live.
The right insurance policy will depend on a number of unique factors. For example, term life insurance might be best for you if you only need to replace your income during a certain time period. Whole life insurance, however, is ideal if you have a lifelong dependent or just want to make sure you have life insurance no matter how old you are.
~Here’s to Your Financial Health!
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