The Value Of Life Insurance Options

You Have 2 Options With Life Insurance

Understanding your life insurance needs is important, but equally important is knowing what type of life insurance will best covers those needs. Every one has different life insurance needs therefore one type of policy does not fit all; understanding the purpose, payout options and cost of each type of policy will help you make the right choice.

Option #1 – Term Life Insurance

The Purpose

This type of policy is for financial obligations which are for a specific period of time. Two of the best examples are your mortgage and your child’s college education. Both of those financial obligations have a start and end date.

The Payout

If you die during the “term” of the life insurance policy, the insurance company pays out money to the individuals you designate on the policy as your beneficiaries. This money is referred to as the death benefit.

If you die after the “term” of the policy has ended, your beneficiaries will not receive a payout from the policy because the policy is considered inactive by the insurance company.

The Cost

You will pay less for a term life insurance policy since it is active for a specific period of time and does not build up cash value. The insurance company’s financial obligation ends when the “term” of the policy ends.

Option #2 – Permanent Life Insurance

life insuranceThe Purpose

Permanent life insurance will provide you with lifelong protection, not protection for just a specific period of time. With certain permanent life policies you can guarantee the death benefit and the rate of return on the cash value.

The Payout

Most permanent life insurance policies build up cash value. This cash value is your money, you can borrow against it, withdraw it or let it continue to build up in the policy.

The Cost

A permanent life insurance policy will cost more, but the additional features it offers should justify the extra expense. If you continue to make your premium payments you can lock in a guaranteed level premium.

The best way to make any type of financial purchase is to be fully armed with knowledge about the details. Now that you know the purpose, payout and cost of the different life insurance policy types you can relax when you shop and buy your life insurance.

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