Types Of Life Insurance: Which One Do You Need?

Many individuals consider life insurance as a necessity. While no one can predict how long you’ll live your life in this world, it’s always recommended to prepare for your family’s future. You should leave memories not debts when you pass away. However, it’s the sad truth that most families are facing. Due to the lack of preparation, the bereaved family suffers financially.

Buying some type of insurance should be considered so you can provide your family with cash or benefit in the event of death. The death benefit can replace your income, pay off debt, cover the funeral costs and even fund college for your children. There are different types of life insurance to choose from. It’s important that you’re aware of which one to choose.

Employer-sponsored life insurance

Upon employment, some individuals already carry basic term life insurance without even knowing it. You’ll need to check with your HR department for you to understand your coverage. Unfortunately, once you leave your job, you’ll also lose your coverage.

Aside from basic term life insurance, you may also be covered by the accidental death and dismemberment insurance (AD&D). However, it’s important to note that if you pass away from non-accidental causes or illness, this type of insurance will not pay out a death benefit.

The cost of this type of insurance will depend on how much your employer is willing to cover. There are workplaces who only offer a basic benefit for free while others have either a monthly or a yearly cost.

Term life insurance

Term life insurance will provide you with coverage for a certain amount of time, usually in increments of five years. This insurance is suitable for those who need coverage for a specified amount of time, say when your child graduates or until you pay off your mortgage. This type of insurance doesn’t have any bells and whistles. So if you die during the term, your family will collect your death benefit. Once the term is over, the policy or benefit will also end.

Term life insurance is considered as the most expensive form of life insurance. The cost will depend on several factors like your age, location, and health.

Permanent life insurance

This life insurance has unlimited coverage as long as you pay the premiums. Although it covers your family, it will also accumulate cash value. In fact, a portion of your insurance premium is intended for building cash value. This means that some of the money you pay for the insurance premium will also earn money. You also have the option to withdraw or borrow cash if you need it. Just keep in mind that any withdrawals or loans that you failed to pay back will impact your death benefit.

If you want permanent life insurance so you can build cash reserves, be sure to weigh the pros and cons. You’ll need to talk to an insurance specialist so you will know the options that work for you. Permanent insurance is also expensive, but its earning potential can definitely outweigh the cost.