There are so many reasons to get life insurance. You want to provide for your loved ones after you are gone. Maybe you want your business to keep running after your death, or donate to a cherished cause. Life insurance should help ease your worries, but the process of researching and purchasing life insurance can be confusing and complicated.
Start by thinking about how much money you’ll need. Consider how much outstanding debt you have, how much your family will need to adjust after you’re gone, what your funeral will cost, and the cost of any other things you’d like to do. If you find that you can’t afford the policy that you’d like, prioritize what you want. You definitely need enough money to pay off your debts and funeral expenses, but what’s most important to you after that? Is it replacing your income? Sending your children to college? The answers will vary from person to person, and it’s important to think about it carefully. Try to balance everything as best you can, but be determined to at least have some insurance, no matter how little. Although I can be daunting to figure out what you need, it will be worse for your family if you have no life insurance at all!
When making a decision about how much insurance you need, start by figuring out how much life insurance you would want to get if cost were not a factor. Think about such factors as funeral costs, what your spouse and children need, and outstanding debts. After coming up with an amount based on those considerations, review price quotes, then balance the amount according to your budget realities. Life insurance is usually one of the first things to get cut in times of personal economic hardship. It is so important to choose a life insurance policy you can really afford, because you need it to be there for your family in case something happens to you.
Whole life, on the other hand, is designed to cover a person until they die, as long as the policy is still viable; that is, as long as you pay the premiums in full and on time. With whole life you can also often pay it up through a certain period, such as ten years. Because this type of policy will inevitably pay out, it’s not as good a risk for the insurance company and will cost a little more than term life, but will never expire, making it worth the extra cost if you can afford it.
These policies aren’t mutually exclusive. You can, if you’re a family man with plenty of responsibilities, take out a long-duration term policy, and then also get a smaller whole life policy as well. This will keep you covered for both the short term in case of disaster and the long term once the term insurance expires.
Finally there’s universal life insurance. Like whole life insurance, it doesn’t have an expiration date. It’s considerably more detailed than the other types of insurance, separating aspects of insurance that are commonly packaged together. Because of this extra layer of organization, some customers will prefer universal insurance to combine insurance with personal savings. Once the insurance builds up enough monetary worth it can be borrowed against, and the face value itself can even go up. Universal life insurance is sufficiently complex that it would take a whole new article to really explain it, but those are the basics.
Universal life insurance is like whole life insurance in that it does not expire as long as the policyholder keeps the policy. It differs from regular whole life insurance in that it places the life insurance and the cash value in separate accounts, whereas regular whole life insurance keeps them together. Largely due to tax considerations, this type of life insurance is attractive to many people as a way to unite life insurance and savings. You can withdraw or borrow against the policy once it accrues enough cash value. You may even see an increase in the face value of the policy. This explanation of universal life insurance is very barebones, since a full explanation of it would require another article.
Susan Reynolds is the webmaster for a leading South African Life Insurance provider. For more information visit: http://life.insurance123.co.za/
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